Congressional Hearing — Fiscal Year 2021 Budget Request, Office of Insular Affairs (House, February 11, 2020)

Summary

Printed House hearing record, Serial No. 116–30, titled Fiscal Year 2021 Budget Request for Department of the Interior's Office of Insular Affairs, before the Committee on Natural Resources on February 11, 2020. The witnesses are Albert Bryan, Jr., Governor of the U.S. Virgin Islands, Lou Leon Guerrero, Governor of Guam, and Arnold I. Palacios, Lieutenant Governor of the Northern Mariana Islands. In the opening statement, presiding Gregorio Kilili Camacho Sablan says the Office of Insular Affairs was invited and declined to appear. Sablan also says Congress gave an 83–17 Federal-local Medicaid match and provided $60 million for the Marianas, and that the White House cut a proposed 6 years of funding back to 2 years.

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Issuer: Congressional materials
Document type: Congressional Hearing
Case: Chrg Chrg 116Hhrg39743 Chrg 116Hhrg39743

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“Congressional Hearing — Fiscal Year 2021 Budget Request, Office of Insular Affairs (House, February 11, 2020).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-chrg-116hhrg39743-chrg-116hhrg39743/, SHA-256 8a3aae584afa16bc06759733f676a164ca94542aa45bcdad55b75ba13f7c6930.

Full text

FISCAL YEAR 2021 BUDGET REQUEST FOR
DEPARTMENT OF THE INTERIOR’S
OFFICE OF INSULAR AFFAIRS

OVERSIGHT HEARING
BEFORE THE

COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION

Tuesday, February 11, 2020

Serial No. 116–30

Printed for the use of the Committee on Natural Resources

(

Available via the World Wide Web: http://www.govinfo.gov
or
Committee address: http://naturalresources.house.gov

U.S. GOVERNMENT PUBLISHING OFFICE
39–743 PDF WASHINGTON : 2020
COMMITTEE ON NATURAL RESOURCES

RAÚL M. GRIJALVA, AZ, Chair
DEBRA A. HAALAND, NM, Vice Chair
GREGORIO KILILI CAMACHO SABLAN, CNMI, Vice Chair, Insular Affairs
ROB BISHOP, UT, Ranking Republican Member

Grace F. Napolitano, CA Don Young, AK
Jim Costa, CA Louie Gohmert, TX
Gregorio Kilili Camacho Sablan, CNMI Doug Lamborn, CO
Jared Huffman, CA Robert J. Wittman, VA
Alan S. Lowenthal, CA Tom McClintock, CA
Ruben Gallego, AZ Paul A. Gosar, AZ
TJ Cox, CA Paul Cook, CA
Joe Neguse, CO Bruce Westerman, AR
Mike Levin, CA Garret Graves, LA
Debra A. Haaland, NM Jody B. Hice, GA
Joe Cunningham, SC Aumua Amata Coleman Radewagen, AS
Nydia M. Velázquez, NY Daniel Webster, FL
Diana DeGette, CO Liz Cheney, WY
Wm. Lacy Clay, MO Mike Johnson, LA
Debbie Dingell, MI Jenniffer González-Colón, PR
Anthony G. Brown, MD John R. Curtis, UT
A. Donald McEachin, VA Kevin Hern, OK
Darren Soto, FL Russ Fulcher, ID
Ed Case, HI
Steven Horsford, NV
Michael F. Q. San Nicolas, GU
Matt Cartwright, PA
Paul Tonko, NY
Jesús G. ‘‘Chuy’’ Garcı́a, IL
Vacancy

David Watkins, Chief of Staff
Sarah Lim, Chief Counsel
Parish Braden, Republican Staff Director
http://naturalresources.house.gov

(II)
CONTENTS

Page
Hearing held on Tuesday, February 11, 2020 ....................................................... 1
Statement of Members:
González-Colón, Hon. Jenniffer, a Resident Commissioner in Congress
from the Territory of Puerto Rico ................................................................ 3
Sablan, Hon. Gregorio Kilili Camacho, a Delegate in Congress from the
Territory of the Northern Mariana Islands ................................................ 1
Statement of Witnesses:
Bryan, Jr., Hon. Albert, Governor, U.S. Virgin Islands ................................ 5
Prepared statement of ............................................................................... 7
Questions submitted for the record ......................................................... 14
Guerrero, Hon. Lou Leon, Governor, Guam ................................................... 24
Prepared statement of ............................................................................... 27
Questions submitted for the record ......................................................... 29
Palacios, Hon. Arnold I., Lieutenant Governor, Northern Mariana
Islands ............................................................................................................ 15
Prepared statement of ............................................................................... 16
Questions submitted for the record ......................................................... 19

(III)
OVERSIGHT HEARING ON FISCAL YEAR 2021
BUDGET REQUEST FOR DEPARTMENT OF
THE INTERIOR’S OFFICE OF INSULAR
AFFAIRS

Tuesday, February 11, 2020
U.S. House of Representatives
Committee on Natural Resources
Office of Insular Affairs
Washington, DC

The Committee met, pursuant to notice, at 2:09 p.m., in room
1324, Longworth House Office Building, Hon. Gregorio Kilili
Camacho Sablan [Vice Chair of the Committee for Insular Affairs]
presiding.
Present: Representatives Sablan, Cox, Cunningham, Soto, Case,
San Nicolas; and González-Colón.
Also present: Representative Plaskett.
Mr. SABLAN. I apologize, I was at a markup that was supposed
to last an hour-and-a-half, and it lasted 4 hours. The Committee
will now come to order.
The Committee is meeting today to hear testimony on the Policy
Priorities of the Trump Administration’s Fiscal Year 2021 Budget
for the Insular Areas.
Under Committee Rule 4(f), any oral opening statements at
hearings are limited to the Chairman and the Ranking Minority
Member.
Therefore, I ask unanimous consent that all other Members’
opening statements be made part of the hearing record if they are
submitted to the Clerk by 5 p.m. today.
Hearing no objection, so ordered.
I also ask unanimous consent for the gentlelady from the U.S.
Virgin Islands—she will be here—Ms. Plaskett, to sit on the dais
and question the witnesses at today’s hearing.
Without objection, so ordered.
I now recognize myself for my opening statement.
STATEMENT OF THE HON. GREGORIO KILILI CAMACHO
SABLAN, A DELEGATE IN CONGRESS FROM THE TERRITORY
OF THE NORTHERN MARIANA ISLANDS
Mr. SABLAN. Good afternoon again, everyone, and thank you very
much for joining us this afternoon. Thank you to the governors,
Governor Guerrero, Governor Bryan, and Lieutenant Governor
Palacios, for being here for this oversight hearing on the
President’s budget proposal for Fiscal Year 2021.
I know Washington is a long way from home and you will have
to make best use of your limited time here. Obviously, you think
it is important to let Congress know what your financial needs are
(1)
2

for the coming fiscal year because Congress appropriates the
money.
I want you to know that the Office of Insular Affairs was also
invited to be here to explain and defend the President’s budget,
and they declined. And given the way they wanted to cut your
funding, I can understand why they may not want to be here. So,
we will proceed without them.
I would like to take a quick look back before we talk about the
future. We made some important decisions for you in Fiscal Year
2020. When the governors were here a year ago, we were on the
brink of a Medicaid cliff. Your Obamacare money was running out,
and the long-standing goal of state-like was unfulfilled. That has
all changed.
You wanted a Federal local Medicaid match like a state’s.
Congress gave you an 83–17 Federal-local match, better than any
state gets. You wanted unlimited Federal money like a state. I
can’t say we have unlimited money, but in the case of the
Marianas, for example, Congress provided $60 million. That is nine
times more than current law, exactly what the Governor’s office
told us would cover their costs.
What we did not get you is a permanent fix. Congress was ready
to give you 6 years of funding. I understand that the White House
is responsible for cutting that back to 2 years. It was the last item
on the agenda before the President said he may consider threat-
ening to veto the budget if 6 years of funding for Medicaid for
Puerto Rico and other territories are in there.
So, now the ball is in your court. Congress wants you to have
more Medicaid money, and we are willing to give you a very gen-
erous FMAP, just what the governors are asking for. But I have
to caution you—if the insular areas do not use this Medicaid money
with a Federal-local match better than any state, then it will be
very difficult for your Representatives here in Congress to make
the case for continuing Medicaid funding at this level beyond 2
years.
Please, you are getting exactly what you asked for, so use it or
it will be very difficult to keep this level of medical funding.
I would also like to note that all the insular areas are in recovery
mode. Hurricanes in the Caribbean, typhoons and cyclones in the
Pacific have had a devastating impact on individuals, families,
public infrastructure, and your economies. Congress has provided,
literally, billions of dollars for the recovery. In last year’s Disaster
Relief Act, we set aside $129 million specifically for the Northern
Marianas’ Yutu recovery. The Marianas are getting $249 million in
CDBG-DR funds. And all the insular areas have access to recovery
money from the EDA, the Agriculture Department, the Army Corps
of Engineers, and other Federal agencies.
I want to let you know—and I think I can speak for all the
insular Representatives—we are tracking the money Congress ap-
propriated for you. If you are having any problems getting that
money, if agencies are slow to respond or put up any roadblocks,
let us know, please. We want you back on your feet as quickly as
possible.
3

During your statements today and during questioning, there will
be ample opportunity to discuss the specifics of the President’s
budget.
I will now turn to the distinguished gentlelady from Puerto Rico,
the Ranking Member, for her opening statement.
STATEMENT OF THE HON. JENNIFFER GONZÁLEZ-COLÓN, A
RESIDENT COMMISSIONER IN CONGRESS FROM THE
TERRITORY OF PUERTO RICO
Miss GONZÁLEZ-COLÓN. Thank you, Chairman, and I welcome all
the governors here. For me, it is a pleasure to have governors com-
ing from far, from the Pacific and the Caribbean, to join us today.
And I do know personally how difficult it is, as a territory, to fight
a lot of the issues that have us together.
I want to say welcome to our friend, Madeleine Bordallo, as well,
always a Member and Representative of Guam. And, of course, our
current Congressman from Guam, Mr. San Nicolas, and Mr.
Sablan, and the Lieutenant Governor of the Northern Mariana
Islands, as well as the Governors of the Virgin Islands and Guam.
I am happy to have you here.
Today, we intend to analyze the priorities and other efforts con-
tained in the President’s fiscal budget 2021 request for insular
areas, which used $89 billion for current appropriations, and $619
million with permanent funding.
These represent a $19 million decrease over the Fiscal Year
2020, but I think it is important to establish that this budget was
just presented yesterday. So, many of us haven’t even finished
reading how that will impact the whole Federal access to many
programs. And, of course, every budget that is presented by the
President during the last 4 years never has been approved after it
has come to Congress. So, this is the reason we want to have your
input in many of those areas, so we can work together.
And in order to have something done, it needs to be in a
bipartisan way. In that sense, the budget was released, and there
is still much to review. I realize it may be somewhat difficult to
comment in detail without having had more time to analyze this
budget. I do, however, welcome the discussion to hear each island’s
top priorities. And I think that is one of the most important things.
As Members of Congress representing the islands, we tried to get
some common agenda in the past, and we have been effective in
doing so.
The Office of Insular Affairs within the Department of the
Interior is responsible for carrying out responsibilities for all U.S.
territories, except Puerto Rico. These are American Samoa, Guam,
the Northern Mariana Islands, and the U.S. Virgin Islands.
And, in addition to providing assistance to these four territories,
this office is charged with overseeing Federal assistance under the
Compact of Free Association, which the United States has signed
with the three freely associated states: the Republic of Palau, the
States of Micronesia, and the Republic of the Marshall Islands.
Given the geographical location and size of the four small U.S.
territories and the freely associated states, each one faces unique
challenges. These can be in the form of economic, health,
healthcare quality, infrastructure, and many others. As we know
4

too well in Puerto Rico, these challenges are only exacerbated by
unequal treatment Americans receive in territories. Multiple
Federal programs such as Medicaid, Medicare, SSI, among many
other programs, treat us differently. And that is the reason we all,
every time we can, work together to achieve equality in many
areas.
My hope is that we can work together to address each island’s
priorities in an efficient way that is beneficial to both the tax-
payers’ money and the residents that call the U.S. territories home.
With your help, Mr. Chairman, I would like to continue the
Committee review of the Fiscal Year 2021 Office of Insular Affairs
budget request with the Department of the Interior. Having their
participation in this process will be crucial.
Again, I want to say thank you, and I look forward to hearing
your testimony. I think there are a lot of things that can be done.
I know one of the issues that is not in the purview of today’s
hearing is the cockfighting ban. And we just talked about that be-
fore the hearing. We also face the same situation. For Puerto Rico,
this is an issue of economic development, because of the jobs that
are created, the tax revenues that are created, as well.
I know that you may not be prepared today to discuss that issue,
but I will be more than happy to receive your comments in writing
regarding those to see how we can push together, not just a
Federal provision of that ban. Some states—in our case, we just
state-legislated to try to mediate these, but I know that will not be
enough.
With that, I yield back.
Mr. SABLAN. Thank you very much. Let me introduce the
witnesses. We have the Honorable Albert Bryan, Jr., Governor of
the United States Virgin Islands.
Welcome, Governor.
We have the Honorable Arnold I. Palacios, Lieutenant Governor
for the Commonwealth of the Northern Mariana Islands.
Lieutenant Governor, welcome.
And, of course, the Honorable Lou Leon Guerrero, Governor of
Guam.
Welcome, Governor.
I would also like to acknowledge the presence of a former
colleague, Ms. Bordallo, and also the presence of—if I am not mis-
taken, I can see him—he is the former staff director for Insular
Affairs under this Committee, Mr. Babauta, and also the Honor-
able Mr. Babauta, former Assistant Secretary of the Interior.
Welcome.
Under our Committee Rules, oral statements are limited to 5
minutes, but your entire statement will appear in the hearing
record.
The lights in front of you will turn yellow when there is 1 minute
left, and then red when time is expired.
After the witnesses have testified, Members will be given the
opportunity to ask questions.
Let me start with Governor Bryan of the United States Virgin
Islands.
You have 5 minutes, sir. Press the button in front of you, please.
5
STATEMENT OF THE HON. ALBERT BRYAN, JR., GOVERNOR,
U.S. VIRGIN ISLANDS
Governor BRYAN. Thank you. Good afternoon, Chairman, Vice
Chairman Sablan, and Committee members. Thank you for the op-
portunity to appear here today to outline the priorities of the U.S.
Virgin Islands, and the important role of the Department of the
Interior’s Office of Insular Affairs in helping us achieve our goals.
The timing of this hearing is fortuitous. As we recover from the
widespread damage and destruction caused by the two devastating
Category 5 hurricanes that hit in late 2017, we must focus on fun-
damental, longer-term issues that need to be addressed by
Congress, including your Committee and OIA.
Further, as recent experiences in Puerto Rico have shown, the
United States must recognize its special responsibilities for the
U.S. territories and the potentially deleterious effects that Federal
policies can have on the territories and U.S. citizens therein. The
United States must face those responsibilities head on and commit
sufficient Federal resources to fulfill its responsibilities to the terri-
tories on a sustainable basis.
The Virgin Islands believes the time is right for a comprehensive
revision of the territory’s economic relationship with the United
States, one that will place the territory on a path to true and sus-
tainable fiscal health.
As part of its long-standing tax relationship with the Virgin
Islands, Congress has historically provided that all Federal taxes
on all products, including rum, manufactured in the Virgin Islands
be returned, or covered-over, to the local Treasury. Rum tax reve-
nues covered-over to the Virgin Islands constitute a major source
of funding for the territory, and are used to finance essential public
services, and to securitize the territory’s bonds and facilitate the
territory’s future access to the capital markets.
The timing of these temporary extensions often causes budget
planning problems and uncertainties for the Virgin Islands. The
Virgin Islands request that OIA and the Committee support the
Virgin Islands’ efforts in Congress to make the temporary rate per-
manent, and thereby avoid the need for periodic, often last-minute,
increases.
The cover-over provision that results in the Virgin Islands
receiving the Federal tax revenues on rum products applies broadly
to tax revenues generated by all articles produced in the Virgin
Islands and transported to the United States. From the mid-1960s
through 2012, a major oil refinery operated on the island of St.
Croix and generated substantial Federal excise taxes, which, on the
face of the governing statute, should have been recovered to the
Virgin Islands Treasury in the same manner as rum excise taxes.
The Virgin Islands request that OIA and the Committee work
with other committees to effect passage of an amendment that fi-
nally seals and returns Section 7652 to its intended function and
requires that fuel excise taxes be included in the cover-over
program.
The Federal Earned Income Tax Credit, or the EITC, and the
Child Tax Credit are intended to encourage and foster work among
low-income individuals. The Federal Government effectively funds
their programs for all states and the District of Columbia through
6

the IRC. While a worthy goal, these tax credits have unintended
and unfair consequences in the Virgin Islands, as well as other ter-
ritories, due to its status as a mirror tax code system. Unlike in
the states and DC, the cost of the Earned Income Tax Credit is
borne solely by the fiscally stressed Virgin Islands and Guam, a
cost which neither territory can bear. As a matter of fairness, and
to avoid imposing an onerous financial burden on the local
Treasury, Congress should provide for Federal reimbursement.
The Virgin Islands would like to thank this body for all of the
work that it has done to secure Medicaid to thousands of Virgin
Islanders. But that issue still remains unresolved.
We also have many requests into Congress in terms of providing
for visa waivers to make us more sustainable, in terms of allowing
visitors not only for medical needs, but for tourism. And we are
asking for the support in this in the homeland security.
Our infrastructure has stayed at the same level for Federal high-
way funds for over 30 years now and continues to be an issue for
Virgin Islanders.
Last, I would like to say the Insular Areas Act expressed a policy
of Congress that the four small territories should be provided cer-
tain flexibilities under Federal grant programs. Importantly, the
Act, as amended, mandates that the Department of the Interior
shall waive matching requirements for all insular areas under all
of its grant programs and requires all other departments and agen-
cies to waive any requirement for local matching.
However, FEMA has not waived the local match for most cat-
egories of public assistance in response to Hurricanes Irma and
Maria, requiring that the Virgin Islands come up with millions of
dollars that are still being supplied by a Federal mandate under
the CDBG-DR.
The GVI proposes that the Act be amended to provide a statutory
presumption in favor of waiving the local share, to foster economic
development and stability, and to update the relationship of the
territories to the Federal Government.
There is no other land state in the Union that has as much
Federal land, percentage-wise, as the Virgin Islands. The Office of
Insular Affairs owns 66 percent of St. John, yet our payment in
lieu of taxes is a mere $30,000, compared to—that should be closer
to $30 million. Just on a glance, the Federal Government owns
more than 14 percent of the land in the Virgin Islands, and all we
get is a 30 percent.
Mr. Chairman, thank you for the opportunity to testify before
this Committee. We have submitted a full written testimony that
expands on the subject matter that I have briefly discussed. While
many of these issues are long-standing, we look forward to working
with this Committee and the Office of Insular Affairs to bring final
resolution to these matters.
Our goal is not simply to survive, but our goal is to thrive. Thank
you.
[The prepared statement of Governor Bryan follows:]
7
PREPARED STATEMENT OF THE HONORABLE ALBERT BRYAN, JR., GOVERNOR,
U.S. VIRGIN ISLANDS
Good afternoon Chairman Grijalva, Ranking Member Bishop, and Committee
members. Thank you for the opportunity to appear here today to outline the prior-
ities of the U.S. Virgin Islands and the important role of the Department of the
Interior’s Office of Insular Affairs (‘‘OIA’’) in helping us achieve our goals.
The Committee on Natural Resources (the ‘‘Committee’’) is primarily responsible
for Federal legislation impacting the U.S. Virgin Islands and the other U.S.
Territories. The Committee also has an important role in working with other com-
mittees to ensure that those committees, in developing and considering Federal
legislation, fully consider the Territories’ unique status and needs and the potential
impact of legislation on the Territories. The Committee also oversees OIA, which is
the Federal agency tasked with assisting the Territories in promoting sustainable
economic growth, fostering development, and otherwise improving the lives of their
citizens, and acting as a liaison between the Territories and the Federal
Government.
The timing of this hearing is fortuitous. As we recover from widespread damage
and destruction caused by the two devastating Category 5 hurricanes that hit in
late 2017, we must focus on fundamental, longer term issues that need to be
addressed by Congress, including your Committee, and OIA. Further, as recent ex-
periences in Puerto Rico have shown, the United States must recognize its special
responsibilities for the U.S. Territories and the potentially deleterious effects that
Federal policies can have on the Territories and the U.S. citizens therein. The
United States must face those responsibilities head-on and commit sufficient
Federal resources to fulfill its responsibilities to the Territories on a sustainable
basis.
The Virgin Islands believes the time is right for a comprehensive revision of the
Territory’s economic relationship with the United States—one that will place the
Territory on the path to true and sustainable fiscal health. I will focus today on
issues of critical importance to the economic development and fiscal stability of the
Territory, along with specific recommendations for action by the Committee and
OIA.
TAXES

A logical starting point in considering how the Federal Government can help
create the investment climate for sustainable economic growth is the critical role of
Federal tax policy. Federal tax policy has an outsized impact on the economy of the
Virgin Islands—a positive impact when it is designed and applied properly, and a
negative impact when it is not. As discussed below, Congress and OIA have a crit-
ical role to play in how the Federal tax code impacts our Territory, our economy,
and our quality of life.
RUM TAX LEGISLATION

As part of its long-standing tax relationship with the Virgin Islands, Congress has
historically provided that all Federal taxes on all products—including rum—
manufactured in the Virgin Islands be returned, or ‘‘covered-over,’’ to the local treas-
ury. Rum tax revenues covered-over to the Virgin Islands constitute a major source
of funding for the Territory, and are used to finance essential public services and
to securitize the Territory’s bonds and facilitate the Territory’s future access to the
capital markets. Permanent law provides that $10.50 of the $13.50 per proof gallon
tax is covered-over to the Virgin Islands, and $0.25 per proof gallon is retained by
the U.S. Treasury. Cover-over of the remainder ($2.75 per proof gallon), however,
has required a series of temporary fixes by Congress. Most recently, after
Hurricanes Irma and Maria, Congress extended the temporary rate through
December 31, 2022.
The timing of the temporary extensions often causes budget planning problems
and uncertainties for the Virgin Islands. The Virgin Islands requests that OIA and
the Committee support the Virgin Islands’ efforts in Congress to make the tem-
porary rate permanent and thereby avoid the need for periodic (often last-minute)
increases.
FUEL TAX LEGISLATION

The ‘‘cover-over’’ provision that results in the Virgin Islands receiving the Federal
tax revenues on rum products produced in the Virgin Islands applies broadly to tax
revenues generated by all ‘‘articles produced in the Virgin Islands and transported
to the United States.’’ 26 U.S.C. § 7562(b). From the mid-1960s through 2012, a
8
major oil refinery operated on the island of St. Croix and generated substantial
Federal excise taxes, which—on the face of the governing statute—should have been
covered-over into the Virgin Islands treasury in the same manner as rum excise
taxes. In the late 1970s, the governments of the Virgin Islands and Puerto Rico
brought suit against the United States seeking to compel the ‘‘cover-over’’ of gasoline
excise taxes into their respective treasuries. The Virgin Islands initially prevailed
in the U.S. District Court and was awarded hundreds of millions of dollars in
gasoline excise tax revenues.
On appeal, however, the Court of Appeals for the District of Columbia Circuit
reversed, thus extinguishing the Virgin Islands’ legal claim as well as any basis for
settlement. The D.C. Circuit based its decision to reject the Virgin Islands’ claim
on a judicially created distinction that—despite the statute’s unambiguous applica-
tion to ‘‘all taxes imposed by’’ the United States ‘‘on articles produced in the Virgin
Islands and transported to the United States’’—limited the types of Federal taxes
that were subject to cover-over. The GVI sought Supreme Court review of the deci-
sion but was denied. Under the principles of res judicata, the D.C. Circuit’s decision
is final and cannot be re-litigated.
Congress, however, has the power to legislatively overturn the judiciary’s decision,
which essentially re-wrote the cover-over statute to limit its application in ways that
cannot be justified under the statute’s plain language. An amendment to Section
7652(b) clarifying the scope of the cover-over program would be sufficient to right
this historical wrong and return the cover-over provision to its original purpose and
effect.
Restoring the cover-over provision to its original breadth would provide the Virgin
Islands with a critical source of revenue that would play a key role in returning the
Territory to long-term fiscal health. The St. Croix refinery, idled in 2012, is set to
re-open in 2020 and resume refining operations on a smaller, environmentally
friendlier scale. Because the refinery has not been operating, the excise tax revenue
it generates will be new revenue, such that covering those revenues into the GVI
treasury will not deprive the Federal Treasury of any existing revenue streams.
The Virgin Islands requests that OIA and the Committee work with other com-
mittees to effect passage of an amendment that returns Section 7652(b) to its
intended function and requires that fuel excise taxes be included in the cover-over
program.
ECONOMIC GROWTH INCENTIVES

Federal tax policy can play a critical role in creating the investment climate to
help the Territory generate sustainable economic growth, create jobs, and improve
its long-term fiscal health. In furtherance of these goals, the Virgin Islands requests
that the Committee and OIA support fair and balanced tax rules for the Territories,
including the possessions tax rules enacted as part of the American Jobs Creation
Act of 2004 (‘‘Jobs Act’’) and the ‘‘GILTI’’ rules enacted as part of the 2017 Tax Act.
Legislation to Modify the Qualified Income Rules and Provide Parity Among
Territories in Treatment of Capital Gains
The Virgin Islands and other Territories face unique economic challenges as a re-
sult of their geographic distance, lack of natural resources, and general small island
limitations on scale. In the case of the Virgin Islands, these challenges have been
exacerbated by harsh income sourcing rules implementing the possessions provi-
sions of the Jobs Act. As a result, the once-promising Virgin Islands economic devel-
opment programs dramatically slowed, and the Territorial government has been left
with few tools to address its stagnant private sector economy and resulting fiscal
problems.
The sourcing rules, particularly whether income may be deemed ‘‘effectively
connected’’ with a V.I. trade or business (‘‘V.I. ECI’’), should be based on established
tax precedents—specifically, the principles embodied in Treasury’s model income tax
treaty. At the very least, even under Treasury’s narrower definition of V.I. ECI,
Treasury should not discriminate against U.S. source income (in favor of foreign
source income) in the determination of V.I. ECI. Accordingly, Congress should mod-
ify the U.S. income limitation in Internal Revenue Code (‘‘IRC’’) Section 937 to
exclude only U.S. source income generated by activities in the United States
(attributable to a U.S. office or fixed place of business).
In addition, an anomaly in the Code allows Puerto Rico to provide more favorable
treatment of capital gains from the sale of personal property held by a Puerto Rico
taxpayer than is available to similarly situated taxpayers in the mirror-code
Territories. There is no sound policy reason for treating mirror code possessions
differently from non-mirror code possessions.
9
Congress should modify the ‘‘effectively connected’’ income rules for possessions in
Section 937(b)(2)—enacted as part of the Jobs Act—by modifying the U.S. income
limitation to exclude only U.S. source (or effectively connected) income attributable
to a U.S. office or place of business. Congress should also ensure parity of capital
gains tax treatment with Puerto Rico and other U.S. possessions by clarifying in
Section 865(j)(3) that capital gains income earned by V.I. taxpayers should be
deemed to constitute V.I. source income under the general sourcing rules without
regard to the tax rate imposed by the V.I. government. This modification is reflected
in H.R. 411 and H.R. 412, both as introduced by Congresswoman Stacey Plaskett
on January 9, 2019, and referred to the Committee on Ways and Means. The Virgin
Islands therefore requests that OIA and the Committee work with Treasury and
other committees to effect passage of these bills.
Legislation to Modify Rigid Residency Requirements
In addition, the Jobs Act created onerous residency requirements for the Virgin
Islands that inhibit the Territory’s ability to attract investment. In the Jobs Act,
Congress provided Treasury authority to modify the rules for determining bona fide
possessions residency. The Virgin Islands has urged Treasury to exercise its author-
ity to consider amendments to the rules, where appropriate, that would give greater
deference to Congress’ goals of encouraging economic and private sector develop-
ment in the Virgin Islands and the other U.S. possessions.
Under IRC Section 932, a ‘‘bona fide’’ resident of the Virgin Islands (i.e., a tax
resident) may satisfy his or her U.S. income tax obligation by filing in, and paying
the applicable tax to, the Virgin Islands. Under Section 934, the Virgin Islands is
authorized to reduce tax on V.I. source income and V.I. ECI. Prior to the Jobs Act,
the determination of ‘‘bona fide’’ V.I. tax residency was based on the totality of an
individual’s facts and circumstances (the ‘‘facts and circumstances’’ test). However,
Section 937, added by the Jobs Act, provides that a ‘‘bona fide’’ resident of the
Virgin Islands is a person who meets all elements of a three-part test (physical pres-
ence, tax home, and closer connection tests). Treasury has provided only very lim-
ited flexibility from the physical presence test by allowing V.I. residents to treat up
to 30 days of off-island travel outside of the United States as ‘‘constructive
presence.’’
The proper test for bona fide V.I. residency should be the test the IRS applies
under IRC Section 7701(b) to determine whether a foreign individual residing in the
United States has sufficient presence in the United States to justify subjecting that
individual to U.S. taxing jurisdiction in the same manner as U.S. citizens. Under
that test, such foreign individual must be physically present at least 183 days in
any one tax year, or an average of 122 days a year over any 3-year moving period.
Despite Treasury’s ample discretionary authority to adopt the 122-day test,
Treasury has taken the position that the Jobs Act prevents it from doing so. The
Virgin Islands therefore requests that the Committee affirm to Treasury that it has
authority to address the inequities in the Jobs Act residency requirements. This
proposal is contained in H.R. 412.
Legislation to Address Inequities in the CFC Tax Regime
The U.S. tax system includes certain anti-deferral rules under which a ‘‘U.S.
shareholder’’ that owns stock in a ‘‘controlled foreign corporation’’ (a ‘‘CFC’’) is re-
quired to include in gross income its pro rata share of, among other items, (i) the
CFC’s Subpart F income, and (ii) the CFC’s ‘‘global intangible low-taxed income’’
(‘‘GILTI’’). A CFC’s Subpart F income includes a range of items, including items of
passive income such as dividends, interest, rents, royalties and annuities. Very gen-
erally, the amount of a CFC’s GILTI is the CFC’s income above a 10 percent annual
return on the tax basis of its tangible assets. These rules result in unfavorable
treatment of Virgin Islands corporations and their shareholders in at least two
ways.
First, these rules inexplicably fail to provide Virgin Islands corporations with the
benefit of an exclusion that benefits similarly situated corporations in other posses-
sions. Under current U.S. tax law, certain Virgin Islands corporations can be subject
to classification as CFCs, causing negative U.S. tax consequences to their U.S.
investors, while similarly situated Puerto Rico corporations (and other possessions
corporations) are excluded from CFC classification. This is simply not fair, nor is
it supportable from a tax policy perspective.
There is no rationale for this unfavorable treatment of Virgin Islands corporations
and their shareholders, which diverts needed capital investments away from the
Virgin Islands to other U.S. possessions. To rectify this unfavorable treatment and
bring tax parity to investments in the possessions, we propose that Section 957(c)
10
be amended to expand the exclusion from the definition of United States person to
include bona fide residents of the Virgin Islands.
Second, the application of GILTI to corporations in the Virgin Islands limits the
effectiveness of the Virgin Islands economic development programs and is incon-
sistent with the long-standing tax relationship between Congress and the Virgin
Islands. The Tax Cuts and Jobs Act of 2017 introduced a new tax on a U.S. share-
holder’s GILTI earned by a CFC. The GILTI tax, by increasing the tax on U.S.
investment in Virgin Islands businesses, is particularly harmful to Virgin Islands
corporations given that, as described above, they do not benefit from the Section
957(c) exclusion that benefits similarly situated corporations in other possessions.
Under the GILTI rules, a corporate U.S. shareholder in a Virgin Islands corpora-
tion that is a CFC generally would be subject to tax at a rate of 10.5 percent
(increasing to a rate of 13.125 percent beginning in 2026) on a broad class of the
Virgin Islands corporation’s income, even if that Virgin Islands corporation is con-
ducting an active business and otherwise meets the applicable criteria to qualify for
a lower rate of tax with respect to such income under a Virgin Islands economic
development program and Section 934(b)(1) of the IRC.
To protect the viability of the Virgin Islands’ Economic Development Commission
(EDC) and other economic development programs and to encourage investment in
economic development in the Territories, the GILTI inclusion received from CFCs
formed in the Territories should be exempt from tax. This critical change could be
accomplished by excluding corporations formed in the Virgin Islands and other
Territories from the definition of ‘‘controlled foreign corporation’’ for purposes of
Code Section 951A. Without this change, almost all potential investors in the
Territories, other than investments from residents of the Territories, will be subject
to the GILTI inclusion, including hotels, manufacturing operations, and high-tech
businesses. Absent a full exemption, the effective rate of tax on GILTI inclusions
from possessions corporation should be reduced. This could be accomplished for cor-
porate U.S. shareholders by increasing the amount of the deduction for GILTI inclu-
sions that are attributable to possessions corporations. The Virgin Islands therefore
requests that OIA and the Committee work with Treasury and other committees to
amend the GILTI provisions that would exempt, or reduce the rate of tax applicable
to, GILTI inclusions attributable to possessions corporations.
Legislation to Reimburse the Virgin Islands and Other Mirror Code Territories for
the Cost of the EITC and CTC
The Federal Earned Income Tax Credit (‘‘EITC’’) and Child Tax Credit (‘‘CTC’’)
are intended to encourage and foster work among low-income individuals. The
Federal Government effectively funds these programs for all States and the District
of Columbia through the IRC. While a worthy goal, these tax credits have
unintended and unfair consequences in the Virgin Islands due to its status as a mir-
ror tax code jurisdiction. Unlike in States and DC, the cost of the EITC is borne
solely by the fiscally stressed Virgin Islands, a cost which the Territory cannot bear.
The EITC costs the GVI approximately from $18,045,792.29 in 2015 to
$8,318,616.08 in 2018, given a reduction in population. As a matter of fairness, and
to avoid imposing an onerous financial burden on the local treasury, Congress
should provide for Federal reimbursement for the cost of the EITC incurred by mir-
ror code jurisdictions (i.e. the Virgin Islands and Guam). There is ample precedent
for such reimbursement. See, e.g., American Recovery and Reinvestment Act of 2009
(ARRA), Div. B, Sections 1001(b) (reimbursement to mirror code possessions for cost
of Making Work Pay Credit) and 1004(c) (reimbursement for cost of American
Opportunity Tax Credit). Other examples of such reimbursement date back to the
1970s.
The CTC is another Federal tax credit that imposes costs (in the form of lost local
revenue) on the mirror code jurisdictions. Congress has provided to the mirror code
jurisdictions Federal reimbursement for the cost of the CTC for families with more
than two children. The GVI was reimbursed $3,547,924.93 in 2018. However, there
is no Federal reimbursement for the cost of the CTC for families with one or two
children. The CTC for such families has reduced the revenues of the GVI by
$8,318,616.08 in 2018, down from $18,045,792.29 in 2015. As a matter of fairness,
and to avoid imposing an onerous financial burden on the local treasury, Congress
should provide for Federal reimbursement for the cost of the CTC for families with
any number of children incurred by the mirror code jurisdictions. There is ample
precedent for reimbursement, as noted above. Indeed, in its final Report, the
Congressional Task Force on Puerto Rico recommends that Congress provide
Federal reimbursement for the costs borne by the mirror code jurisdictions for the
CTC. See Task Force Final Report, p. 31, fn. 38.
11
These provisions are critical for not only providing needed fiscal relief for the
Virgin Islands but also for maintaining and growing a workforce needed to grow and
sustain the Virgin Islands’ economy. The Virgin Islands therefore requests that OIA
and the Committee work with Treasury and other committees to provide for reim-
bursement to mirror code jurisdictions of the costs of both the EITC and the CTC.
HEALTHCARE AND SOCIAL WELFARE

Notwithstanding the additional Federal resources that the Affordable Care Act
and disaster funding provided, the task of implementing healthcare reform in the
Virgin Islands has proven to be challenging, particularly in light of the disparate
treatment of the Territories. Significant progress has been made in addressing—in
the short term—the Medicaid funding issues in the Territory, but a permanent solu-
tion is still needed. Further, under Medicare, the Virgin Islands-owned hospitals are
under-reimbursed for the costs of providing care to the many Medicare-eligible U.S.
citizens in the Territory. These challenges can be significantly ameliorated by per-
manent changes to Medicaid provisions in the Social Security Act and changes to
the reimbursement methodology for the hospitals under Medicare.
Medicaid
The Virgin Islands appreciates the disaster-related Medicaid relief, particularly
the additional funding and temporary waiver of the local match in the aftermath
of Hurricanes Irma and Maria, and for the recently enacted relief in the final FY
2020 appropriations package, specifically a state-like FMAP and a deferral of the
‘‘fiscal cliff’’ for 2 years. This interim relief avoided the loss of healthcare coverage
for thousands of U.S. citizens in the Virgin Islands and a possible collapse of our
healthcare system. A permanent solution that provides for state-like treatment for
the Virgin Islands and other Territories is needed in order to avoid the same dire
consequences recently averted upon enactment of the final FY 2020 appropriations
package. The Virgin Islands requests the support of OIA and the Committee for
legislation that permanently guarantees state-like treatment for the Territories.
Medicare Reimbursement for Hospitals
The two hospitals in the Virgin Islands are reimbursed for Medicare expenditures
based on an outdated methodology established under the Tax Equity and Fiscal
Responsibility Act of 1982 (‘‘TEFRA’’), resulting in under-reimbursement in the mil-
lions of dollars for each hospital each year. In 2011, the hospitals each submitted
to the Centers for Medicare and Medicaid Services (‘‘CMS’’) a request for assignment
of a new base year. Those requests are still pending.
More recently, Hurricanes Irma and Maria destroyed both hospitals to such an
extent that they need to be replaced. The Virgin Islands understands that CMS, as
a result, will provide the hospitals with new base years, at least going forward. The
Virgin Islands requests the support of OIA and the Committee for new base years
for both hospitals.
Extension of SSI to the Virgin Islands and Other Territories
Supplemental Security Income (‘‘SSI’’) is a Federal need-based cash assistance
program intended to equalize eligibility standards and benefit amounts for similarly
situated aged, blind, and disabled people. The program was created to replace exist-
ing, disparate programs with one that provides an income source for the aged, blind,
and disabled whose income and resources are below a certain level, and incentives
and opportunities for those able to work or be rehabilitated.
SSI is a Federal entitlement program, paid out of the general revenue of the
United States. However, residents of the Virgin Islands, Guam, and American
Samoa are not under the SSI program, despite having needs similar to low-income
aged, blind, and disabled persons in other Territories and the States. Instead of SSI,
the former Federal-state programs of Old-Age Assistance, Aid to the Blind, and Aid
to the Permanently and Totally Disabled (AABD) continue to operate in the Virgin
Islands. Benefits are capped, which means that the grant in no way considers actual
need. There also is a 25 percent local match, and the responsibility to administer
these programs falls on the Territory. As a result, benefits are far less than those
under SSI and far less predictable (benefits can vary significantly from year to year
and even within a year).
Including the Virgin Islands, Guam, and American Samoa in the SSI program
would increase benefits for the elderly, blind, and disabled to a level on par with
their counterparts on the mainland and CNMI. The Virgin Islands therefore re-
quests that OIA and the Committee work with other committees to effect these
necessary changes.
12
HOMELAND SECURITY

Proposed Virgin Islands Special Visa Waiver Program
Tourism is the lifeblood of the Virgin Islands economy. The Virgin Islands is a
highly desirable tourist and sporting event destination, and the Territory’s ability
to attract is limited by the lack of a visa waiver program similar to those in the
Pacific Territories. The Virgin Islands seeks authority from Congress or administra-
tive authorization from the Department of Homeland Security to establish a special
visa waiver program for the Virgin Islands that mirrors programs currently author-
ized for, and utilized successfully by, Guam and the Commonwealth of the Northern
Marianas (‘‘CNMI’’).
Executive Order 13597, entitled ‘‘Establishing Visa and Foreign Visitor Processing
Goals and the Task Force on Travel and Competitiveness’’ (Jan. 19, 2012), directed
the Secretaries of Commerce and Interior to co-lead an inter-agency task force to,
among other things, develop recommendations for a ‘‘National Travel & Tourism
Strategy’’ and increase efforts to expand the national Visa Waiver Program (‘‘VWP’’).
Pursuant to authority of the Immigration and Nationality Act (‘‘Act’’), 8 U.S.C.
§ 1184(a)(1), the Attorney General and Secretary have promulgated regulations es-
tablishing a national Visa Waiver Program (‘‘VWP’’) which allows nationals of cer-
tain countries to travel to the United States (and U.S. Territories) for stays of up
to 90 days without obtaining a visa. VWP-eligible countries include most European
countries, plus Japan, Singapore, Brunei, and South Korea. Not all travelers from
VWP countries, however, are eligible to use the program. VWP travelers are
required to apply for authorization through the Electronic System for Travel
Authorization (‘‘ESTA’’), must be screened at their port of entry into the United
States, and must be enrolled in the US-VISIT program administered by DHS.
The proposed special visa waiver program would permit the Department of
Homeland Security to consider approving visa-less entry into the Virgin Islands for
the same category of users specified in the Executive Order, PLUS residents of non-
VWP countries, including residents of the Caribbean Community (‘‘CARICOM’’) as
determined by a tourism and economic need survey similar to that used in Guam
and CNMI.
Such a visa waiver program is not without precedent. A separate and special visa
waiver program for Guam (‘‘GVWP’’) and the Commonwealth of the Northern
Marianas (‘‘NMVWP’’) was established pursuant to these same provisions. These
special visa waiver programs are specifically authorized by statute. In particular,
Section 214(a)(1) of the Act provides that ‘‘[n]o alien admitted to Guam or [the
CNMI] without a visa . . . may be authorized to enter or stay in the United States
other than in Guam or [the CNMI] or to remain in Guam or [the CNMI] for a period
exceeding 45 days from the date of admission to Guam or [the CNMI].’’ Pursuant
to this authority, GVWP-eligible countries include certain Pacific Island nations,
Australia, New Zealand, and Taiwan.
As the Virgin Islands is outside of the U.S. Customs Zone, such waiver would pose
no threat to the United States and its other Territories because movement beyond
the Virgin Islands would require any such visa-less guests to subject themselves to
U.S. immigration and customs inspection and control. Visitors arriving by sea or air
would be notified that they cannot move beyond the boundaries of the Virgin
Islands.
The economic impact for the Virgin Islands, however, would be significant as the
Virgin Islands could then receive visitors in the following categories:
• Seasonal yachting and sporting events;
• Shopping visits from other Eastern Caribbean countries;
• Medical visits to the Territory’s medical facilities and medical professionals;
• Arriving air passengers to the Territory’s airports for transfer to any of the
northeastern Caribbean islands; and
• Cruise line passengers on ships that customarily only service Eastern
Caribbean islands because of their European Union no-passport or visa
requirements.
Requests for such access has been increasing by residents of the Eastern Caribbean
and by the Florida and Caribbean Cruise Association (‘‘FCCA’’).
The Virgin Islands seeks authority from Congress to establish a special visa
waiver program for the Virgin Islands that mirrors programs currently authorized
for, and utilized successfully by, Guam and CNMI. We urge OIA and the Committee
to work with Homeland Security and other committees to authorize such a program
in any immigration reform legislation that might be considered by Congress.
13
INFRASTRUCTURE

Long-term under-investment by the Federal Government has resulted in a sub-
stantial portion of our infrastructure being dilapidated and inadequate. Further, the
poor condition of our infrastructure has made it more susceptible to damage or de-
struction when natural disasters strike. Long-term improvement in the funding allo-
cations for the Territories is needed to bring their infrastructure into the condition
necessary to support a modern economy.
The disparities in funding are striking in surface transportation. In the final
years of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users and extensions thereof, Congress allocated $62 million annually
to the four Territories under the Territorial Highway Program (including a $50
million allotment and $12 million in lieu of High Priority Project funding). In 2012,
the Moving Ahead for Progress in the 21st Century Act (‘‘MAP-21’’) maintained
highway funding levels for all states, DC, and Puerto Rico, but inexplicably cut the
Territories’ funding by a third (to $40 million a year).
The subsequent bill (‘‘FAST Act’’) did not restore the funding cut in MAP-21; it
provided only a small (5 percent) increase over the reduced MAP-21 allocation for
the small Territories, (to $42 million a year). In contrast, the FAST Act increased
funding to the states and DC ranging up to 14.8 percent over the life of the FAST
Act (through FY 2020). Further exacerbating these funding shortfalls is the exclu-
sion of the Territories from other surface transportation programs, which provide
substantial funding to the States and DC.
Congress will have an opportunity to correct these inequities in the upcoming
surface transportation reauthorization and any other infrastructure funding bills.
For example, on January 29, 2020, House Democrats put forth a framework to in-
vest $760 billion over 5 years in the Nation’s infrastructure. Earlier, the Trump
Administration had proposed investing $2 trillion on infrastructure.
The small Territories need substantial investment in their aging and deficient in-
frastructure. Further, because of the increasing risk of damage from natural
disasters, the Territories’ infrastructure must be built to be more resilient and sus-
tainable than most other areas of the United States. In order to provide the
Territory a fair and equitable share of infrastructure funding, the Virgin Islands re-
quests that in the upcoming surface transportation reauthorization bill funding for
highways in the Virgin Islands be increased to not less than $35 million annually,
and, further, that funding in any other infrastructure package provide a set-aside
of not less than 1.5 percent for the four Territories. We urge OIA and the
Committee to work with the Department of Transportation and other committees
and Federal agencies to achieve these necessary provisions.
UPDATE TO INSULAR AREAS ACT

Enacted in 1977, the Insular Areas Act, 48 U.S.C. § 1469a, expressed the policy
of Congress that the four small Territories (the Insular Areas) should be provided
certain flexibilities under Federal grant programs. Importantly, the Act, as amend-
ed, mandates that the Department of the Interior shall waive matching require-
ments for all Insular Areas under all of its grant programs, and requires all other
departments and agencies to waive any requirement for local matching funds under
$200,000 otherwise required by law. Further, pursuant to the Act, all Federal agen-
cies have the discretion to waive the entire local match for the Insular Areas (the
four small Territories) for Federal funding programs. The Act also allows Federal
grants to Territories to be consolidated to minimize administrative burdens.
There is ample precedent for Federal agencies to exercise their discretion under
the Act to waive the local match. Indeed, the local match has been waived under
the Insular Areas Act in a number of contexts in the past, particularly after cata-
strophic events. For example, in recognition of the severity of Hurricanes Irma and
Maria, FEMA invoked the Insular Areas Act authority to waive the 25 percent non-
Federal matching requirement for the Hazard Mitigation Grant Program in the
Virgin Islands. However, FEMA has not waived the local match for most categories
(Categories C-G) of public assistance in response to Hurricanes Irma and Maria,
requiring the Virgin Islands to come up with potentially hundreds of millions of dol-
lars in local match under those programs, amounts that could and should be better
spent on disaster recovery and economic development. In other instances, Federal
agencies have not used their discretion to waive the local share in other grant pro-
grams, despite the difficulty that the Virgin Islands and the other Insular Areas
have in providing a local match.
Opportunities abound as well. As the world becomes increasingly interconnected,
the opportunity for economic growth and expansion in our territories has never been
greater. Innovation, investment, entrepreneurialism: they are the building blocks
14
that made America into one of the most dominant economies on Earth. We now
have the opportunity to transform our natural blessings in the territories into un-
precedented prosperity for our people, in partnership with our fellow U.S. citizens
and our Federal Government.
Our goal is not just to survive. Our goal is to thrive.
The GVI proposes that the Act be amended to provide a statutory presumption
in favor of waiving the local share; to foster economic development and stability; and
to update the relationship of the Territories to the Federal Government as partners
in the global influence and economic dynamics of the United States of America.

QUESTIONS SUBMITTED FOR THE RECORD TO GOVERNOR ALBERT BRYAN JR. OF THE
U.S. VIRGIN ISLANDS

Governor Bryan did not submit responses to the Committee by the
appropriate deadline for inclusion in the printed record.

Questions Submitted by Rep. Neguse
Question 1. Governor Bryan, is the Virgin Islands still dealing with an outbreak
of the Stoney Coral Tissue Loss Disease?
Question 2. Governor, you know better than us that healthy coral reefs protect your
islands from coastal erosion and storm damage among other beneficial effects. But
these precious resources have been experiencing a variety of threats including poor
water quality, over-harvesting, coastal development, disease and bleaching. The
Office of Insular Affairs (‘‘OIA’’) has supported coral reef initiatives on your islands
in the past under recommendations from the Coral Reef Task Force. However, for
FY2021, OIA is proposing cuts to their Coral Reef Initiative by more than 65 percent.
Question 3. How will such a drastic cut affect your natural resources managers’
ability to control and eradicate invasive species and protect your fragile
environments?
Question 4. Are there particular environment or wildlife challenges that Congress
can be helpful to you in addressing?
Question 5. Is the Department of the Interior being responsive to your needs? What
is the most pressing of those that is not currently funded at necessary levels?

Mr. SABLAN. Thank you very much, Governor.
I now recognize the Honorable Arnold I. Palacios, Lieutenant
Governor for the Commonwealth of the Northern Mariana Islands.
Governor, you have 5 minutes.
STATEMENT OF THE HONORABLE ARNOLD I. PALACIOS,
LIEUTENANT GOVERNOR, NORTHERN MARIANA ISLANDS
Lieutenant Governor PALACIOS. Thank you, Chairman Sablan,
Ranking Member, and other members of your Committee. Thank
you for allowing me to testify this afternoon. I am here on behalf
of Governor Torres, who sends his regrets for not being here to
speak with you once again.
This past year has presented challenges that have truly show-
cased how vulnerable our community is to threats beyond our con-
trol. Having successfully exited the austerity measures we imposed
on our employees in the government after Super Typhoon Yutu,
Governor Torres is in the CNMI today working to contain the eco-
nomic collapse following the outbreak of the novel coronavirus,
which has significantly impacted our tourism arrival to the islands,
essentially crippling the economy’s sole industry.
As a result of this outbreak, CNMI expects to lose 150,000
tourist arrivals, primarily from China, and 30 percent of our ex-
pected total annual arrivals for this fiscal year.
This year has proven that our economic development trajectory
has led us to a position that is the definition of fragility. In a
moment, without a single instance of an outbreak in the CNMI, we
lost the second-largest tourism market due to a force that we can-
not even see.
As you know, Section 701 of our government states that the
United States will assist us in our efforts to achieve a progressively
higher standard of living for our people as part of this American
family, and develop the economic resources needed to meet the
responsibilities of local self-government.
President Trump’s budget submission for Fiscal Year 2020
reaffirms this commitment, and it is now more urgent than ever to
revisit what being a member of the American economic community
means.
We wish to thank the Department of the Interior and OIA for
their commitment to seeing tangible results in our CIP program
and other funding support. The Congress and the Administration
must continue to recognize that a modern, functional infrastructure
is an absolute prerequisite to economic development in all insular
areas. CIP programs assist us in this effort.
16

However, the program has been $27.7 million since the inception
of the CNMI in 1978, and continues at this level, when it was
modified to include Guam, American Samoa, and the U.S. Virgin
Islands. We would like to see Congress increase the level of funding
for the CIP programs in our insular areas. The CNMI once again
urges the review, therefore, of the CIP grant programs to allow an
increase in the budgeted amount that adjusts for inflationary costs
and current infrastructure needs of the U.S. territories.
Mr. Chairman, I wish to thank all the members of this
Committee for your continued support through the many chal-
lenges we have faced in our current immigration transition.
Governor Torres and I continue to say that we have every interest
in creating more jobs and opportunities for U.S. workers in the
Commonwealth. But improvements can be made from our experi-
ence thus far.
I wish to offer the following recommendations for your consider-
ation: (1) allow the CNMI Government to participate in the labor
certification process in a similar manner as is allowed for our sis-
ters and brothers in Guam; (2) fully lift the exclusion of construc-
tion workers from the CW-1 program. A full relief of this restriction
will help support the development of our new homes damaged by
our typhoons, and to further develop the economy toward increased
jobs and opportunities for U.S. workers; and (3 we ask that you
eliminate the touch-back provision to prevent a quarter of the labor
force departing the CNMI for an indeterminate number of months
at the start of Fiscal Year 2021.
Mr. Chairman, we need your assistance. The American economic
community’s promise to our forefathers is not defined by the rigor
of our regulations. It is defined by the promise of our ideals. I be-
lieve this to be true, and I look forward to continuing to work
alongside you as we inch closer to that dream of real membership
in this great community.
Before closing, Congressman, I wish to also extend our apprecia-
tion for your work, and those of the other Congressional Members
from the insular areas on the new Medicaid allocation. This was
one of the most welcome news in our healthcare system. Thank
you. [Speaking foreign language.]
[The prepared statement of Lieutenant Governor Palacios
follows:]
PREPARED STATEMENT OF THE HONORABLE ARNOLD I. PALACIOS, LIEUTENANT
GOVERNOR, COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS
Good afternoon, Chairman Grijalva, Ranking Member Bishop, Congressman
Sablan and members of the Committee. Thank you for allowing me this opportunity
to testify at this hearing on the Fiscal Year 2021 budget request for the Department
of the Interior’s Office of Insular Affairs (OIA).
Additionally, I appreciate that this hearing will afford us the opportunity to dis-
cuss the many urgent and troubling economic issues facing the CNMI today and
ways Congress can support our resiliency toward external economic shocks.
I am here on behalf of Governor Ralph Torres who sends his deepest regrets for
not being able to speak with you all once again. This past year has presented chal-
lenges that have truly showcased how vulnerable our community is to threats
beyond our control. Having successfully planned an exit to the painful austerity
measures placed in the aftermath of Super Typhoon Yutu, Governor Torres is in the
CNMI today doing all he can to contain the economic collapse resulting from the
outbreak and spread of the novel coronavirus which has significantly impacted the
influx of tourists to our islands, essentially crippling the economy’s sole industry.
17
As a result of this outbreak, the CNMI expects to lose more than 150,000 tourist
arrivals from China against earlier forecasts for this fiscal year. This estimated loss
represents more than 30 percent of our expected total annual arrivals for this fiscal
year. This loss of income for our economy is and will be painful, but is not solely
contained to the China market. Concern has spread throughout the tourism indus-
try. Much like SARS before it, the coronavirus’ effects on the CNMI tourism market
will be felt long after the outbreak has subsided.
This year has proven that our economic development trajectory, inclusive of the
effects of Federal laws, has led us to a position that is the definition of fragile. In
a moment, without a single instance of the outbreak in the CNMI, we lost the sec-
ond largest tourism market due to a force we cannot even see. In this state, we
must return to the hopes created during our origins as a Commonwealth.
Section 701 of the Covenant to Establish a Commonwealth of the Northern
Mariana Islands in Political Union with the United States of America states that
the U.S. Government will ‘‘assist the Government of the Northern Mariana Islands
in its efforts to achieve a progressively higher standard of living for its people as
part of the American economic community and to develop the economic resources
needed to meet the financial responsibilities of local self-government.’’
President Donald J. Trump’s budget submission for Fiscal Year 2020 reaffirms
this commitment and it is now more urgent than ever to revisit what being a
member of the American economic community means.
The recent history of the CNMI’s collaboration with the OIA has produced tan-
gible and lasting results that have aided in the development of our infrastructure
and provided additional resources for our community and our economy. The redevel-
opment of the former Puerto Rico dump to a beautiful tourist attraction and the on-
going sewer line development efforts are prime examples of the possibilities that can
be obtained through collaboration. Additionally, OIA has been instrumental in the
funding of a range of programs to advance the service of government through the
technical assistance program. For the hard work in understanding the needs and
complexities present in the CNMI, we wish to thank the Department of the Interior,
and OIA.
The existence of the OIA is indicative of something that must be repeated—the
Territories, like the CNMI, have such unique challenges and face such tremendous
obstacles toward sustaining viable economies that a separate approach is necessary.
The Congress and the Administration must continue to recognize, as they have
done since the origins of the Commonwealth government, that a modern, functional
infrastructure is an absolute prerequisite to economic development. However, time
continues forward and as with all things, these resources will one day no longer be
of use. We do not have the resources available to undertake the redevelopment of
the monumental infrastructure initiatives of the U.N. Trust Territory era, but we
must. We soon must rehabilitate our airport, our seaports, our sewage treatment
facilities, our water wells, our sewer and water lines, but we simply cannot do these
necessary things while partitioning up a single pot of resources that have not
changed since the inception of the Commonwealth government.
As the CNMI has asked before, Congress and the Administration must recognize
that the Capital Improvement Project (CIP) Grants provided under the CNMI’s
Covenant agreement with the United States must adapt to the circumstances of
today.
The CNMI once again urges the review of the CIP Grants Program to allow for
an increase in the budgeted amount that adjusts for inflationary costs and current
infrastructure needs of the U.S. territories.
The CIP Grants Program has been one of the most successful Federal programs
for the CNMI, Guam, American Samoa, and the U.S. Virgin Islands for infrastruc-
ture projects, and has had a significant impact on the advancement of quality of life
and economic development in the islands.
Given that the program has been $27.72 million since its inception for the CNMI
in 1978 under Section 701 of U.S. Public Law 92–241, and continued at this level
when it was modified to include Guam, American Samoa, and the U.S. Virgin
Islands under U.S. Public Law 104–134 until today, a review of the CIP Grants
Program is timely given the priority of infrastructure for the smaller U.S.
Territories and the severe economic conditions that have presented themselves in
recent years.
The discussion of the budget for this critical department is important for the
CNMI. However, the needs of our people span across the Federal Government.
I wish to thank all the members in this Committee for your continued support
through the many challenges we have faced with our current immigration transition
period. Because of your support and assistance, the CNMI economy averted total
collapse after the passage of the Northern Mariana Islands U.S. Workforce Act (U.S.
18
Public Law 115–218) and the allowance for the CNMI economy to continue to grow
beyond the expiration of the transition period in 2019. We have made tremendous
progress in committing ourselves to building a strong and vibrant economy based
on the strengths of U.S. workers, but this ongoing transition period should be one
of fluidity and willingness to be flexible toward accomplishing the intents of the law.
In this first year of implementation of U.S. Public Law 115–218, the CNMI has
been diligent in our pursuit of full compliance with the new requirements of the law.
In light of this experience, I must raise concern about the unintended consequences
that must be averted at the risk of damaging our struggling economy further and
imperiling the many U.S. jobs we have created thus far.
As Governor Torres and I continue to say, we have every interest in creating more
jobs and opportunities for U.S. workers seeking to build their lives in the CNMI.
However, the counterintuitive nature of the CNMI economy has showcased that the
best way to create opportunities for U.S. workers is to continue to build the economy
alongside our foreign workers. Labor is a critical factor necessary for production,
and the reality is, at this point in time, we simply do not have enough to sustain
a viable economy.
In an effort to continue the pursuit of greater levels of U.S. workers in our
economy, I wish to offer the following recommendations for your consideration:
1. Allow the CNMI Government to participate in the labor certification process
in a similar manner as is allowed for in Guam. The U.S. Department of Labor
does not produce labor force data for the CNMI, the Bureau of Labor
Statistics does not conduct labor market surveys in the CNMI, and the CNMI
is not included in USDOL’s Occupational Employment Statistics (OES) pro-
gram. This is understandable as USDOL had limited historic involvement in
the CNMI labor market. To remedy this deficiency and to ensure labor mar-
ket decisions are being made with the most relevant and locally
contextualized information, providing the same authority as Guam to certify
wage and labor needs prior to submission of a CW-1 petition would be logical
and efficient.
2. Fully lift the exclusion of construction workers (Standard Occupational
Classification Code 47–0000) from the CW-1 program and further recognize
the limited number of U.S. construction workers and the inapplicability of al-
ternative visa classification on the labor force needs of the CNMI community.
A full relief on this restriction will help support the development of new
homes to combat the housing shortage caused by the destruction of Super
Typhoon Yutu and to further develop the economy toward increased jobs and
opportunities for U.S. workers.
3. Eliminate the touch-back provision to prevent a quarter of the labor force
departing the CNMI for an indeterminate number of months at the start of
Fiscal Year 2021. At this time of severe financial difficulties, a dramatic re-
duction in the size of the labor force will compound our mounting challenges
into a potential collapse of our economy. Removing the requirement for for-
eign workers to return to their country of origin following the second renewal
period does not create a pathway to citizenship. The periodic loss of a large
segment of the workforce will create unnecessary complications within the
economy and hurt U.S. job seekers entering into the labor force.
Congress must understand the vulnerability that persists in a small island
economy like the CNMI. Limited resources, high transportation and trading costs,
diseconomies of scale all play a significant role in leading the CNMI to the position
it is in today. We struggle against global forces, unprecedented natural disasters,
and a litany of impediments keeping us from making good on the promise enshrined
in our founding document—‘‘A progressively higher standard of living for its people
as a part of the American economic community.’’
I am seeking your help in finding solutions and before you, there are many. To
break the barriers keeping us from viability is our access to tourists who would pay
to enjoy our beaches and breathe in our clean air, the cost of transportation of goods
and people that locks our residents in and a world of potential visitors out. We need
your assistance to ensure that poor health does not guarantee financial struggles.
We can do so much if we work toward a shared understanding of who we are.
The American Economic Community promised to our forefathers is not defined by
the rigor of our regulations. It is defined by the promise of our ideals.
We are here asking for your assistance to be proactive in the support of these
ideals. Moreover, to work with us in addressing the unique and dire needs of the
thousands of Americans living on our shores. I also ask that you understand our
attempts to fight for every opportunity we must thrive within this community. We
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need increased access to financial resources to scale that development ladder, but
we also need your trust that we can succeed together.
I believe this to be true and I look forward to continuing to work alongside you
as we inch closer to that dream of real membership in this great community.

QUESTIONS SUBMITTED FOR THE RECORD TO LIEUTENANT GOVERNOR ARNOLD I.
PALACIOS OF THE COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS

Questions Submitted by Rep. Neguse
Question 1. Governor, you know better than us that healthy coral reefs protect your
islands from coastal erosion and storm damage among other beneficial effects. But
these precious resources have been experiencing a variety of threats including poor
water quality, over-harvesting, coastal development, disease and bleaching. The
Office of Insular Affairs (‘‘OIA’’) has supported coral reef initiatives on your islands
in the past under recommendations from the Coral Reef Task Force. However, for FY
2021, OIA is proposing cuts to their Coral Reef Initiative by more than 65 percent.
1a. How will such a drastic cut affect your natural resources managers’ ability to
control and eradicate invasive species and protect your fragile environments?
Answer. The CNMI immensely values its coral reefs and continues to implement
management efforts that support its sustained use and conservation as it is a sig-
nificant part of the Commonwealth’s culture. Unfortunately, these critical habitats
face multiple threats that continue to place severe stress upon one of the CNMI’s
most valued resources. These threats grow exponentially as the CNMI sees its popu-
lation increase, its tourism market thrive, and coastal development climb.
To address such threats such as coral bleaching and diseases, invasive species,
and physical damage, the CNMI’s natural resource managers rely on its partnership
with the Department of the Interior’s Office of Insular Affairs to carry out various
management actions and plans specifically crafted to address the declining health
of the CNMI’s coral reefs. Previous grants awarded to the CNMI through OIA’s
Coral Reef Initiative (now the Coral Reef and Natural Resource Initiative) have
gone toward projects such as developing Conservation Action Plans and Watershed
Management Plans for the CNMI priority watersheds, behavior change campaigns
to raise awareness and promote sustainability and green lifestyles, building local
capacity in coral reef management, and coral reef restoration work.
As the United States Coral Reef Task Force’s co-chair, the Department of the
Interior has been an invaluable partner to the CNMI, assisting the jurisdiction to
address these various threats to our most precious resource. Currently, DOI is pro-
viding funding to the CNMI to implement restoration activities as a more proactive
approach toward coral reef management. The successful establishment of a state-
managed in-water coral nursery will allow the CNMI to eventually outplant coral
fragments that are proven to be more resilient to climate change and restore de-
graded or damaged reefs around the islands.
1b. Are there particular environment or wildlife challenges that Congress can be
helpful to you in addressing? Is the Department of the Interior being responsive to
your needs? What is the most pressing of those that is not currently funded at
necessary levels?
Answer. OIA had previously supported the Micronesia Challenge—a shared com-
mitment between the Federated States of Micronesia, the Republic of the Marshall
Islands, the Republic of Palau, Guam, and the CNMI to effectively conserve at least
30 percent of near-shore resources and 20 percent of terrestrial resources across
Micronesia by 2020. In 2019, the Chief Executives of the Micronesian jurisdictions
renewed their commitment to the Micronesia Challenge by extending and expanding
their goal of conservation to be met by 2030. Continued funding support for this ini-
tiative will be helpful toward achieving this collective effort.

Questions Submitted by Rep. Sablan
Question 1. The Interagency Group on Insular Areas was created to ‘‘solicit
information and advice from the elected leaders of the U.S. Insular Areas’’ and make
recommendations to the President to address appropriate issues regarding Federal
programs. Do you believe the executive branch is doing enough to address your
concerns?
20
Answer. The annual IGIA Senior Plenary Meeting serves an integral forum for
insular area leaders to bring awareness to the critical issues faced by the territories.
These annual meetings provide a great opportunity to directly engage with Federal
departments and agencies on the needs and concerns of Federal programs in the
insular areas.
Question 2. Are there any specific issues you think Congress needs to address?
Answer. Paramount among our many pressing issues is the state of the economy
in the aftermath of Super Typhoon Yutu in 2018 and the outbreak of the novel
coronavirus which has severely impacted vital tourism arrivals. Throughout the
many actions in the past several years, Congress has shown a willingness to under-
stand the unique circumstances the CNMI faces in establishing and maintaining a
viable and functioning economy. If Congress were to look at the totality of our cir-
cumstances with objectivity of the present facts, it would be apparent that much
needs to be done to mitigate the ever-present and high probability of economic col-
lapse that we contend with on a near constant basis. We cannot maintain a long-
term growth trajectory while remaining at the edge of a cliff. Small changes around
the world can result in catastrophic repercussions to our economy. Congress should
recognize that we are not similar to the states in this regard, and to see stability
in this region, greater emphasis on developing a more diversified and sustainable
economy is an absolute requirement.
As the CNMI government has stated before, the CW-1 program is crucial toward
obtaining the necessary labor to grow our economy. That is still true today, and the
opportunity to obtain that growth is affected by several provisions contained in the
Northern Mariana Islands U.S. Workforce Act. These concerns I have outlined in
my submitted testimony.
Further, however, the CNMI needs additional Federal Government support in en-
suring long-term competitiveness of our industries against regional and inter-
national destinations. Greater emphasis should be added toward crafting national
legislation that drives U.S. investment to the U.S. territories, as we continue to
struggle to compete against even the most disadvantaged U.S. mainland community
due to our unique and crippling limitations. The Congress can assist the CNMI in
meeting its U.S. workforce targets by allotting additional Federal resources to the
CNMI labor force. Currently the majority of the funds dedicated to supporting the
transition program, originate from employers within the CNMI through the addi-
tional fees required under the CW-1 petition process. If Congress wishes to see
greater levels of success in this effort, more resources are needed.
If we were to look at the major economic issues facing the U.S. territories in the
last decades of our histories, it is difficult to locate action by Congress that has
showcased a proactive interest in supporting economic development among our com-
munities. We do not wish to remain a problem to be solved by the Federal Govern-
ment, but Congress must realize that there needs to be a new approach to territorial
issues that is driven by a goal of viable, resilient and functioning economies within
its U.S. territories.
Question 3. Congress passed the FY 2020 appropriation with $6.25 million for the
formulation and implementation of energy action plans to reduce the cost of elec-
tricity, stop the loss to island economies from purchase of imported fuels, and
increase the efficiencies of your distribution systems. This a long over-due down
payment on P.L. 113–235. The House has shown we are willing to invest much more.
Our FY 2020 bill had $12 million for all of you, but the final bill cut that in half.
We need to hear from you. Are you interested in more help to cut the cost of electricity
for your constituents and modernize your electrical systems?
Answer. The CNMI appreciates all assistance provided toward the reduction of
our dependence on imported fossil fuels. We are approaching a period of great op-
portunity in the coming years, as we target this funding source, along with addi-
tional resources provided through the Federal Government’s response to Super
Typhoon Yutu, to harden our power system and implement efficiencies that will
support more affordable and consistent utilities services to our people.
We are certainly in support of any additional assistance Congress can provide and
the need for such assistance is apparent. But it is also important to recognize that
direct appropriations are a part of the equation. Congress can assist the CNMI in
accessing greater resources within the financial markets to support financing for
large-scale and necessary infrastructure spending. Increasing the total amount of
CIP provided to the CNMI to an inflation adjusted level and ensuring consistent ap-
portionments would open a range of financing opportunities presently unavailable
due to our present financial condition. I additionally ask for consideration of
territory-specific legislation from Congress that would greater incentivize U.S.
21
investment into the territories as a means to find the necessary capital to modernize
our electric grid and our general infrastructure.
Question 4. How is Interior and the Office of Insular Affairs helping your adminis-
tration combat and prepare for the effects of climate change?
Answer. The Office of Insular Affairs has been a consistent ally in our efforts to
confront and respond to increasing weather events. The effects of natural disasters
are profound and the impacts are spread throughout the Nation. The response of
the entire Federal Government to Super Typhoon Yutu has been of tremendous sup-
port to the CNMI and OIA has been a critical partner in this effort alongside the
range of Federal agencies that include FEMA, EDA and HUD to name a few.
Question 5. On February 7, 2020, the House passed legislation that would provide
funding for the Earned Income Tax Credit in Guam, the U.S. Virgin Islands,
American Samoa, and the Northern Marianas. That is worth $11 million per year
for the Marianas. But the White House says the President will veto the bill. President
Obama came out in favor of EITC for the insular areas at the end of his second term.
Where do you stand on this issue? Should we provide Federal funding to pay our
low-income working families?
Answer. I support the extension of Federal funding to cover the provision of the
Earned Income Tax Credit to CNMI taxpayers. This administration maintains the
year’s long policy of the CNMI in requesting the Federal Government to recognize
the disparity territorial treasuries face in the application of the EITC and the effects
this program has on local budget resources. In 2016, Governor Torres requested the
Federal Government’s support under President Barack Obama to extend resources
to implement the EITC in the CNMI and that request is present within the 902
report submitted to Congress. Further, Governor Torres supported legislation pre-
sented to Congress on the extension of the EITC to CNMI taxpayers. This is a crit-
ical program that would support families, and workforce development if Federal
funding was assured to ensure it is provision.
Question 6. Congress helped you avoid the Medicaid cliff with passage of Public
Law 116–94 on December 20, 2019. The Marianas is getting $60 million this year
and $60 million next year—nine times more than we would otherwise have received
and more than we have ever received before. Public Law 116–94 also reduced our
local share of Medicaid from 45 percent to 17 percent—better than the matching
amount for any state. Can you tell us how you are using all this new money to
improve delivery of health care to our constituents?
Answer. The Medicaid Program received a total of $36 million in disaster relief
funding at 100 percent Federal share. The disaster relief funds enabled the CNMI
Medicaid program to make full payments to the Commonwealth Healthcare
Corporation (CHCC) and other private providers in the CNMI.
Furthermore, since the CNMI Medicaid program had depleted its funds by
September 30, 2019, the additional funds enabled the CNMI to satisfy pending pay-
ments to private providers, including off-island inpatient care, specialized consulta-
tion, laboratory, radiology, prescription drug payments, and others.
Question 7. Congress provided $20.8 million for technical assistance to the insular
areas last year. The Administration keeps trying to cut technical assistance. The
President’s FY 2021 budget proposes $14.67 million. OIA hands out that technical
assistance money in response to requests from governors and others. Congress gives
OIA free rein to decide. Would you would prefer more control of that money? For
instance, would you like some of that technical assistance slush fund put it into
specific programs?
Answer. In our collaborative relationship with OIA, we find we have open commu-
nication as to the direction of technical assistance funding to CNMI priorities. The
current operation of this program provides necessary support to the CNMI with the
primary limitation being the limited total amount of funding available. I would
respectfully request the consideration of Congress to continue supporting this worth-
while program and find avenues to increase the total amount appropriated to sup-
port this necessary funding source for the territories.
Question 8. The Pacific governors know that the Federal Government made an
error in how it counts the number of FAS immigrants in Hawaii. Because of their
error, OIA has proposed cutting what American Samoa, Guam, and the Northern
Marianas get in Compact Impact funding to make up for what Hawaii did not get
in past years. Hawaii needs that money, but I do not think that the other insular
areas should have to pay for the Census Bureau’s and OIA’s mistake. Do you think
we should reduce the administrative budget of OIA to make up for their mistake,
22
rather than making you pay? Does your administration provide reports on the costs
of hosting Compact migrants?
Answer. Resources and attention should rather be directed to the issue of whether
the authorized level of mandatory assistance is insufficient to meet the costs of serv-
ices provided by each affected jurisdiction. I support the call of the other territory
leaders in urging Congress to work with the affected jurisdictions to resolve this
issue prior to the disbursement of future Compact Impact funds.
And while I disagree that the territories should be made to pay for the mistake
of the Federal Government, I also believe it is unfair to penalize OIA, when the
mistake did not originate from them.
Question 9. A key feature of the U.S. Workforce Act (P.L. 115–218) is the annual
spending plan the Governor puts together for the training fees that employers of CW
workers must pay. The money is supposed to train local workers to replace foreign
workers. Is the Governor’s plan working as projected? How many local workers are
being adding to the workforce?
Answer. The first annual plan for the expenditure of CW training fees is currently
progressing toward full implementation. We are thankful for the cooperation the
CNMI has received with the U.S. Department of Labor in creating the plan and look
forward to utilizing the available funds to ensure more U.S. workers in our labor
force. It is critical to note that the demand for workers is contingent upon the state
of our economy. The CNMI economy is currently experiencing difficulties related to
the effects of Super Typhoon Yutu, the outbreak of the coronavirus and the newly
implemented requirements of the U.S. Workforce Act. It continues to be the position
of the CNMI government that a good and growing economy creates opportunities for
U.S. workers in our community.
Question 10. Another key feature of the U.S. Workforce Act is that OIA must report
to Congress on what that agency is doing to help economic development in the
Marianas. Do you agree with their first report? Are you satisfied with what OIA is
doing to identify economic development opportunities for the Northern Marianas?
Can you give us an example of how OIA is helping you?
Answer. Economic development in the CNMI is difficult, as the strict limitations
we face on land and resources are only compounded by limited access to labor and
capital resources. The report of the Department of the Interior showcases a brief but
accurate narrative of the financial difficulties experienced in the CNMI and the
Administration has been diligent partners in recognizing the needs of our economy.
The report details the numerous grant programs and consultative support funded
by the Department and the accounting of these programs is an accurate description
of the help being provided to the CNMI.
Question 11. EPA was recently in the Marianas to plan for using the $56 million
for solid waste. Can you tell me what the plan is? Will Rota and Tinian finally get
modern, environmentally appropriate solid waste systems?
Answer. The CNMI Government, through the Bureau of Environmental and
Coastal Quality (BECQ), Office of Planning and Development (OPD), Capital
Improvement Projects (CIP), and Department of Public Works (DPW), are in
ongoing discussions with EPA to formulate the Draft Strategy Summary and Initial
Plan for CNMI Recovery and Solid Waste Management.
At this time, ongoing discussions are centered on the following proposals:
1. $1.1M—Update of CNMI Integrated Solid Waste Management Plan
2. $2.6M—Increase solid waste staffing capacity within the CNMI
3. $1M—Design and implement composting pilot project on Tinian
4. $51M—CNMI solid waste infrastructure
i. Close Marpi Cell 1; open Cell 2; construct Cell 3
ii. Construct Tinian landfill
iii. Construct Rota landfill
Question 12. How is the additional Nutritional Assistance Program funding being
used? Do you have enough money to keep benefits at the same level as Guam?
Answer. The disaster funding of $25.2 million was allocated as follows: 8.68
percent ($2,186,727) for Administrative costs and 91.32 percent ($23,013,273) for
Program Benefits costs.
A total of $7,904,171 had been spent as of February 24, 2020.
23
Any costs incurred above the $25.2M will be charged against the FY 2020 NAP
Block Grant. Utilizing both funding sources, the CNMI will have enough funding
to keep benefits at the same level as Guam for FY 2020. However, NAP is currently
evaluating the income standards and benefit levels for FY 2021 with $12.148M plus
anticipated carryover funds of $2,032,783 from the FY 2020 block grant and
$3,124,593 from the ENAP funds, roughly $17,305,376 in total. With the anticipated
funding availability for FY 2021, it appears that funding would be insufficient to
maintain the Guam level in FY 2021.
Question 13. What are you doing with the water and sewer money?
Answer. These funds will support 14 well sites and for wastewater treatment
plant rehabilitation for both Sadog Tasi and Agingan. The intent is to return them
to their original design specification and operating condition so that CUC can get
an additional 25 to 40 years of life out of those two critical facilities.
CUC will also be completing its water hardening efforts with installation of back-
up power supplies and building structures to house these units for up to 70 percent
of the water supply system.
Question 14. How is the $2 million for financial management being used?
Answer. The Office of Grants Management will expand on its duties and respon-
sibilities, specifically related to disaster recovery that is primarily focused on finan-
cial management, reporting, and compliance pertaining to all disaster-related
funding. The Commonwealth Office of Recovery & Resiliency (CORR) is being estab-
lished alongside a team of technical experts (contracted consultants) and will be
working with the various CNMI Government Departments, Offices, and instrumen-
talities in order to maximize efficiency and productivity of recovery efforts.
The primary goals of CORR will include coordinating the implementation of
disaster recovery programs; monitoring expenditure of all Federal disaster assist-
ance programs; and tracking progress on all Federal recovery program awards.
The grant will be utilized to fund activities of the CORR to help improve financial
management coordination across each agency and organization receiving disaster
recovery funds related to Typhoon Yutu. In turn, improvement of the financial
management processes will help ensure:
• Compliance with Federal grant regulations for financial and performance
management;
• Increased financial management accountability and transparency through
reporting; and
• Improvements to the CNMI Government’s overall administration of Federal
grant programs.
The grant will also be utilized to fund capacity building for financial and perform-
ance management across the recipient agencies of Federal disaster funds (grantees)
and others performing disaster recovery work through the following activities:
• Hands-on training;
• Workshops;
• Strengthening of internal controls (policies and procedures) including capacity
building (hands-on workshops)
• Tracking tools such as electronic database, logs and spreadsheets; and
• Upgrading/purchasing of equipment and software, as applicable.
Furthermore, the grant will be utilized to create and maintain critical reports on
disaster funding for all interested parties. These reports shall be made available on
a website and shall identify:
• Summary total of Federal awards per grantor agency;
• Detailed expenditures for awarded projects updated on a monthly basis; and
• Elements of the Federal program and projects and the CNMI Government
administering and user agency.
Overall, the effect of the above CORR activities will be improved coordination and
oversight for financial and program management at the grantee user agency level
that may be adopted for all grant programs as applicable.
The CNMI Government is receiving multiple Federal disaster grant funds to
assist in the response, restoration and mitigation efforts across the territory as a
result of Super Typhoon Yutu.
This request through the OIA’s Technical Assistance grant will provide technical
assistance with funding key fiscal management, accountability, and transparency
24
activities related to disaster recovery brought upon by the major disaster declaration
of Super Typhoon Yutu.
Question 15. Are you having any problems accessing these funds that I put into
the Disaster Recovery Act for the Marianas?
Answer. No.
Question 16. What are your thoughts on the Prior Service Trust Fund? Should OIA
continue to bankroll the fund? Should OIA keep using Technical Assistance Program
grant funds?
Answer. I support the United States’ continued commitment to the hundreds of
beneficiaries who previously served in the U.S.-administered Trust Territory of the
Pacific Islands (TTPI), as these benefits represent a responsibility assumed by the
Federal Government following the dissolution of the TTPI in 1986.
Question 17. Recently imposed austerity measures include 32-hour work weeks for
government employees because of the significant downturn in economic revenue. How
will this impact employees who are paid with Federal program funds? How will
cutting their hours help with the financial challenges?
Answer. Tourism is the lifeblood of this economy. It funds necessary public serv-
ices and provides jobs for our residents. When events such as Super Typhoon Yutu
and the outbreak of the coronavirus impact this flow of resources into our economy,
the entire community is affected. Both public and private sector organizations are
reeling from this onslaught of economic disruptions, and nearly all employers are
making the difficult but unavoidable decisions to reduce work hours. It is critical
to note that federally funded employees work alongside locally funded employees,
in the same office spaces and using the same pool of physical resources. It is not
a prudent use of limited Federal Government resources to continue to open offices
at a total capacity in which the programs funded cannot find productive use for the
time being spent. As I have mentioned, the CNMI economy is in a difficult position.
The steps we are forced to take have tremendous impacts to the nature of our com-
munity, but are required to ensure the continuation of government services, the
proper use of Federal resources, and the mitigation of financial crisis of substan-
tially deeper proportions. The thoughts and assistance of Congress in supporting a
more resilient and diversified economy in the CNMI is necessary, and should in-
clude all issues of congressional jurisdiction, such as, limiting restrictions on labor
and construction resources, providing greater incentives for U.S. companies to invest
in the CNMI, and increasing Federal resources in targeted areas to support
economic stability, ameliorate structural inefficiencies present in small island econo-
mies and proactively supporting economic growth in lieu of tighter restrictions on
economic activity.

Mr. SABLAN. [Speaking foreign language.] I would now like to
welcome the Governor of Guam, the Honorable Lou Leon Guerrero.
Governor, you have 5 minutes, please.

STATEMENT OF THE HON. LOU LEON GUERRERO, GOVERNOR,
GUAM
Governor GUERRERO. Thank you, Congressman.
[Speaking foreign language] for the opportunity to appear before
this Committee today to make comments on the proposed Fiscal
Year 2021 budget request for the Department of the Interior. My
testimony on OIA’s budget will be brief.
Throughout OIA’s existence, the U.S. territories have largely
benefited from the flexibility of Federal grants that respond to the
diverse needs of our islands. These grants vary. OIA’s role in pro-
viding this assistance continues to be an important part of Guam’s
strategic growth, but we are appreciative of more than OIA’s
funding. We also value its partnership and advocacy within the
Federal bureaucracy.
25

Having served my first year as Governor of Guam, I have been
witness to this value firsthand. As this Committee contemplates
OIA’s Fiscal Year 2021 requests, I am in favor of increasing the
budget that provides for territorial assistance in the areas of tech-
nical assistance, maintenance assistance, and energizing insular
communities. The purposes of these areas, along with the flexibility
maintained by OIA to prioritize these grants, respond to both basic
and growing needs of U.S. island communities.
U.S. territories, however, need changes in policy that this
Committee has supported in the first session of the 116th
Congress. Specifically, I would like to acknowledge Chairman
Grijalva, Ranking Member Bishop, and Delegate Kilili Sablan for
convening a hearing that identified the Medicaid cliff caused by ex-
piring provisions of the Affordable Care Act for the territories.
Through their leadership, the work of this Committee, and the
Congress as a whole, millions of Americans living in the territories
maintained their access to health care without unfair matching
rates or onerous caps.
As a result of this Committee’s interest and advocacy, the
Congress passed legislation that raised the caps for all U.S.
territories and changed our matching formula from 43 percent to
17 percent for the next 2 years. We are, of course, grateful for this
new formula, and that Guam’s cap was raised from $18 million to
$127 million per year. And, Congressman, be assured we will spend
all that money.
However, we should be treated no differently than if one resided
in a state. I am hopeful that when Congress revisits this issue, that
state-like treatment for Medicaid can be fully extended to U.S.
territories.
Similarly, U.S. territories whose tax code mirrors the U.S. tax
code find themselves treated differently with the Earned Income
Tax Credit, which is a program that benefits working people with
low to moderate income. I am in favor of programs such as this.
However, its application in Guam and other territories is a burden
on our local coffers. The EITC benefit is directly paid out by the
U.S. Treasury, and is estimated to be a $56 billion program.
However, such benefit is not one assumed directly by the Federal
Government. Rather, the benefit is paid directly out from our local
coffers. For Guam, the estimated annual cost is $60 million, a ben-
efit that is otherwise paid by the Federal Government in every
state of the Union, and at a figure which, if left in Guam’s budget,
would allow us to nearly retire our deficit, make investments into
education and public safety, or replace our only public hospital.
I applaud House Ways and Means Chairman Richard Neal for
authoring H.R. 3300, the Economic Mobility Act of 2019, and for
its inclusion in the recent supplemental bill passed by the House
last week. The language will direct the U.S. Treasury to reimburse
Guam for 75 percent of its EITC costs. Mr. San Nicolas is the spon-
sor of this bill, and though I believe that Guam and our sister terri-
tories should be treated equally with the states by reimbursing us
100 percent of our costs, H.R. 3300 is a step toward fairness.
As I give this testimony, I cannot help but think how many gov-
ernors of Guam have covered the same ground. For years, terri-
torial governors sitting in hearings like this have highlighted the
26

costs associated with the Compacts of Free Association. While these
bilateral documents help to offset China’s growing influence in the
Western Pacific, and preserve our national security interests,
Guam and other affected jurisdictions are left to fund the con-
sequences of unmitigated migration.
While Guam’s Compact-related expenditures far outweighs the
Federal offset, equal to only 10 percent of our total island costs, the
methodology used to calculate these costs is often the subject of
skepticism and inquiry. The economic benefit analysis will accom-
pany shortly our Federal report.
As the upcoming negotiations to extend financial terms of the
current Compact nears, I implore this Committee to encourage the
Administration to consider including as agenda items: (1) a screen-
ing program by the Department of Homeland Security to ensure
that migration to U.S. jurisdictions complies with the Compact; (2)
I would like them to reimburse Guam 100 percent of our total
costs; and (3) I would also like the Committee to consider providing
greater support to FAS countries in developing their economies and
opportunities for their people.
As the Committee is aware, as a strategic location for the coun-
try’s projection of forces in the Indo-Pacific region, Guam is host to
a multi-billion-dollar military infrastructure. We soon will have a
home inaugurated as Camp Blaz, and we will be endeavoring about
$8 billion in cost, an expense shared by both Japan and the United
States.
In the past, Congress has created a Guam-only visa waiver pro-
gram, and has also removed Guam from the national cap on H-2
labor. Given these precedents, I am advocating that Congress pass
legislation to create a Guam-only H-2 labor program. I am hopeful
that you would consider my proposal, as I advocate for it this year.
Finally, I want to thank this Committee for its expeditious action
on H.R. 1365, and we are equally grateful to the Office of Insular
Affairs’ role, and to that of the Assistant Secretary Doug Domenech
for the interagency effort to work bipartisanly with my administra-
tion that has allowed Guam to make awards to those remaining
survivors. The ability to do this, while still supporting the passage
of H.R. 1365 and maintaining our local action, does not abdicate or
negate the need for action by Congress.
We are appreciative of the Committee’s long-standing involve-
ment dating back to our first Delegate, Antonio Won Pat, and with
every Delegate who has championed the issue of parity in Guam:
Mr. Blaz, Mr. Underwood, Ms. Bordallo, and your current
colleague, Mr. San Nicolas.
We are hopeful that the U.S. Senate will pass H.R. 1365. Thank
you again for the opportunity to appear before this Committee, and
I apologize for going over by 3 minutes, 44 seconds, but we have
all traveled very far. Thank you for your patience in listening to
our testimony.
[The prepared statement of Governor Guerrero follows:]
27
PREPARED STATEMENT OF THE HONORABLE LOURDES A. LEON GUERRERO,
GOVERNOR OF GUAM
Hafa Adai and Si Yu’os Ma’ase for the opportunity to appear before this
Committee today to make comments on the proposed FY 2021 budget request for
the Department of the Interior’s Office of Insular Affairs. By extension, I will also
share with the Committee my perspective on Federal policy which weakens Guam’s
economic growth.
My testimony on OIA’s budget will be brief. Throughout OIA’s existence, the U.S.
territories of Guam, American Samoa, the U.S. Virgin Islands, and the Common-
wealth of the Northern Mariana Islands have largely benefited from the flexibility
of Federal grants that respond to the diverse needs of our islands. These grants
vary. They can provide technical assistance to improve our human capacity making
our local governments more efficient and effective, they can help our governments
meet a shortage of public school busses or emergency vehicles, or they can be the
building blocks of our plans to address school maintenance, adopt greener energy
solutions, or develop our workforce.
OIA’s role in providing this assistance continues to be an important part of
Guam’s strategic growth. But, we are appreciative of more than OIA’s funding, we
also value its partnership and advocacy within the Federal bureaucracy.
Having served my first year as Governor of Guam, I have been witness to this
value firsthand. I am grateful to OIA’s career staff and its leadership for the strong
professional relationship we have forged since I took office.
As this Committee contemplates OIA’s FY 2021 request, I am in favor of increas-
ing OIA’s budget that provides for territorial assistance in areas of Technical Assist-
ance, Maintenance Assistance, and Energizing Insular Communities. The purposes
of these areas, along with the flexibility maintained by OIA to prioritize these
grants, respond to both basic and growing needs of U.S. island communities.
U.S. territories however need changes in policy that this Committee has sup-
ported in the first session of the 116th Congress. Specifically, I would like to ac-
knowledge Chairman Grijalva, Ranking Member Bishop, and Delegate Kilili Sablan
for convening a hearing that identified the Medicaid cliff caused by expiring provi-
sions of the Affordable Care Act for the territories. Through their leadership, the
work of this Committee, and the Congress as a whole, millions of Americans living
in the territories maintained their access to health care without unfair matching
rates or onerous caps.
As a result of this Committee’s interest and advocacy, the Congress passed legis-
lation that raised the caps for all U.S. territories and changed our matching formula
from 43 percent to 17 percent for the next 2 years. We are of course grateful for
this new formula and that Guam’s cap was raised from $18 million to $127 million
per/year. However, Americans living in territories should be treated no differently
than if one resided in a state. I am hopeful that when the Congress revisits this
issue, that state-like treatment for Medicaid can be fully extended to U.S.
territories.
Similarly, U.S. territories whose tax code mirrors the U.S. tax code find them-
selves treated differently with the Earned Income Tax Credit, which is a program
that benefits working people with low to moderate income. I am in favor of pro-
grams such as this, however, its application in Guam and other U.S. territories is
a burden on our local coffers. The EITC benefit is directly paid out by the U.S.
Treasury and is estimated to be a $56 billion program.
However, in Guam and the U.S. Virgin Islands, where our tax code mirrors the
U.S. tax code, such benefit is not one assumed directly by the Federal Government.
Rather, the benefit is paid directly from local government coffers. For Guam, the
estimated annual cost is $60 million. A benefit that is otherwise paid by the Federal
Government in every State of the Union and at a figure which, if left in Guam’s
budget would allow us to nearly retire our deficit, make investments into education
and public safety or replace our only public hospital which was built in 1964.
I applaud House Ways and Means Chairman Richard Neal for authoring H.R.
3300, the Economic Mobility Act of 2019 and for its inclusion in the recent supple-
mental bill passed by the House last week. The language will direct the U.S.
Treasury to reimburse Guam for 75 percent of its EITC costs. Mr. San Nicolas is
a co-sponsor of the bill and though I believe that Guam and our sister territories
should be treated equally with the states by reimbursing us 100 percent of our costs,
H.R. 3300 is a step toward fairness.
As you may know, the Administration has issued a ‘‘Statement of Administration
Position’’ on the supplemental measure which indicates that the President will veto
it if passed by the Senate. The SAP does not mention any specific opposition to
28
offsetting Guam’s costs, so I am hopeful that the House can move the bill as a
stand-alone or find another legislative vehicle that the Senate can eventually pass.
As I give this testimony, I cannot help but think how many governors of Guam
have covered the same ground. For years, territorial governors, sitting in hearings
like this, have highlighted the costs associated with the Compacts of Free Associa-
tion. While these bilateral documents help to offset China’s growing influence in the
Western Pacific, and preserve our national security interests, Guam and other af-
fected jurisdictions are left to fund the consequences of unmitigated migration. We
have documented our costs at $150 million per/year.
While Guam’s Compact related expenditures far outweighs the Federal offset,
equal to only 10 percent of our total costs island, the methodology used to calculate
these costs is often the subject of skepticism and inquiry. To that end, Guam has
been working with GAO to meet previously identified gaps in reporting and design
a methodology that works. That method, and the Economic Benefit Analysis that
accompanies it will be finalized shortly. The net impact of this effort is a cost that
is accurate and fundable.
With the upcoming negotiations to extend financial terms of the current Compact
nears, I implore this Committee to encourage the Administration to consider includ-
ing as agenda items: (1) an executable screening program by the Department of
Homeland Security to ensure that migration to U.S. jurisdictions complies with the
Compact; (2) reimbursing Guam 100 percent of our total costs or, at minimum,
define ‘‘offset’’ to be 75 percent of our total expenditures hosting FAS citizens; and
(3) providing greater support to FAS countries in developing their economies and
opportunities for their people.
As this Committee is aware, as a strategic location for the country’s projection of
forces in the Indo-Pacific region, Guam is host to a multi-billion dollar military in-
frastructure. In a short time, Guam will also be the newest home to the newest
Marine Corps Base constructed in more than 50 years, which will take on the name
of Guam’s former Delegate and first son of Guam to attain the rank of General in
the U.S. Marine Corps, the late Ben Blaz.
The yet to be inaugurated Camp Blaz, has been an endeavor that will ultimately
cost $8 billion—an expense shared by both Japan and the United States.
A decision by the Homeland Security Department in 2014 rolled back Guam’s use
of H-2 laborers, however the labor demands needed to build Camp Blaz continued
to be available to the military. Because foreign labor was preserved for primarily
military construction and severely limited for civilian projects, the cost of construc-
tion in Guam has risen, housing is becoming unaffordable, our hotel industry cannot
provide enough rooms to meet growing tourism, and in the midst of an $8 billion
investment in Guam which naturally attracts private interests—investors are
deterred from investing in our island because of the uncertainty of securing labor
for any projects outside of military interests.
In the past, the Congress has created a Guam-only visa waiver program and has
also removed Guam from the national cap on H-2 labor. Given these precedents, I
will be advocating that the Congress pass legislation to create a Guam-only H-2
labor program. Such a program will be exclusive to Guam and coincide with military
buildup with a sunsetting provision.
Peace is good for everyone. And the national interest is best served when the mili-
tary and civilians are good neighbors—especially in small communities. It is also
important to point out that lacking an overall policy to economically develop our
U.S. territories, it would behoove us all to not take advantage of interests who want
to develop Guam while the Federal Government is making an $8 billion investment
into the island.
I am hopeful that this Committee can support such a proposal as I advocate for
it this year.
Finally, I want to thank this Committee for its expeditious action on H.R. 1365;
and we are equally grateful to the Office of Insular Affairs’ role and to that of
Assistant Secretary Doug Domenech, for the interagency effort to work bipartisanly
with my administration that has allowed Guam to make awards to those remaining
survivors of Guam’s wartime occupation in the absence of the Treasury not being
able to do so at this time.
The ability to do this, while still supporting the passage of H.R. 1365 and main-
taining that our local action does not abdicate or negate the need for action by the
Congress, has been important to allow Guam’s remaining survivors parity, justice,
and healing during this 75th year marking the island’s liberation from Japanese
occupation.
We are appreciative of the Committee’s long-standing involvement, dating back to
our first Delegate, Antonio Won Pat and with every Delegate who has championed
29
the issue of parity to Guam; Mr. Blaz, Mr. Underwood, Ms. Bordallo, and your
current colleague, Mr. San Nicolas.
We are hopeful that the U.S. Senate will pass H.R. 1365 soon. As the number of
living World War II survivors shrinks each day, I think it is right that they know
you stood with them.
Thank you again for the opportunity to appear before this Committee and I look
forward to answering any questions you may have.

QUESTIONS SUBMITTED FOR THE RECORD TO GOVERNOR LOU LEON GUERRERO OF
GUAM

Mr. SABLAN. You are more than welcome. It is our privilege that
all three of you are actually here this afternoon.
First, I would like to seek unanimous consent that the Delegate
from the U.S. Virgin Islands, Ms. Plaskett, be allowed to sit on the
dais and ask questions.
Without objection, so ordered.
It is now time for Members to ask questions. Members will each
have 5 minutes to ask their questions and get the response.
I will and I would think that others may be submitting questions
for the record. The Committee will forward those questions to you,
the witnesses, and look forward to getting responses in a 10-day
period. Thank you.
I yield myself 5 minutes for questions.
Again, welcome, Governors. And I understand that economic
development was a theme of IGIA, this year’s theme. But clearly,
all the insular areas are struggling. I am happy that issues identi-
fied by territorial governors last year were reported as addressed—
the Medicaid cliff and FMAP, natural disaster recovery, foreign
worker visas, Federal tax policy, Guam World War II Recognition
Act.
A couple thoughts for American Samoa. I am not sure how the
other Delegates feel, but some of these issues that I worked on, I
have never heard anything from OIA. It was Congressional
Members working together on the Medicaid. It is over 2 years of
work.
So, I am going to ask. Did you hear any proposal this morning
that will get your economies growing, Governor Bryan?
Governor BRYAN. We were the ones doing the proposing, in terms
of it growing our economy.
One of the things that came up key that I mentioned was that
we need to be aligned with U.S. foreign policy in the Caribbean, as
well as within the Pacific for my friends. We don’t really see a
strategy that is beyond us.
I mean, we are so small, anything that happens—we also pointed
out the fact that Puerto Rico has been under duress for several
years now, and there has been no real definitive action by the U.S.
Congress or the Administration to help to create a vehicle that
would put us on a road to sustainability again. And at the same
32

time they watch us headed down the same track as Puerto Rico has
been, and there is no help in sight.
I mean, more than putting the PROMESA in there, there has not
been an act that would create more pharmaceutical companies, an
advantage to distillation, or some other economic incentive that
would create prosperity and sustainability——
Mr. SABLAN. Governor, thank you. I have 5 minutes, so I really—
no disrespect.
Governor BRYAN. Oh, I thought it was my 5 minutes. I am sorry,
sir.
[Laughter.]
Mr. SABLAN. No, sorry.
Lieutenant Governor Palacios, did you hear any specific
proposals that would get the Marianas’ economy growing?
Lieutenant Governor PALACIOS. Nothing specific. We pointed out
a lot of issues that need to be addressed. EDA was there.
Mr. SABLAN. Yes.
Lieutenant Governor PALACIOS. There were several departments,
Federal departments, that offered the assistance.
But we always talk about capacity. And there are times when we
just don’t have the capacity. Surely, with a nation like the United
States, which is the most prosperous country in the world, there
has to be a policy that would work for the insular areas. Somebody
within the Federal machinery could certainly take a look at this
issue and say, ‘‘What can we do to craft policies for the Virgin
Islands, for the Commonwealth, for Guam, as they are unique.’’
Mr. SABLAN. And the Department of the Interior, Governor, is
supposed to be our advocate in the executive branch. And I would
be remiss if I don’t say that they have not exactly had stellar
records. I am not saying they have not done anything, but there
is a lot of wish—we wish they would do a little bit more.
I have 47 seconds. Governor Guerrero?
Governor GUERRERO. Thank you, Congressman. Yes. We actually
were driving the discussions. However, they did talk about oppor-
tunity zones, and the process that they have done to help us along,
and encouraged us to take advantage of that tax incentive
program.
We also talked a lot about workforce development, and the im-
portance of apprenticeship, business-private partnerships. But I
think, as territories, we need to be the one aggressively driving the
agenda. That is what I would like to see.
And I just wanted to say we have a very good working relation-
ship with OIA. In fact, they were very, very visible in our National
Governors Association. So, I do appreciate that working
relationship.
And, of course, we have to bring in our Congressional Delegates,
also.
Mr. SABLAN. Thank you. Thank you very much. My time is up.
I now recognize the Ranking Member, the gentlelady from Puerto
Rico. She has 5 minutes.
Miss GONZÁLEZ-COLÓN. Thank you, Chairman Sablan. And
again, thank you, all the governors, for being here.
I know many of the situations that we all face are examples of
what it is like living in the territories. I will begin with Lieutenant
33

Governor for the Northern Mariana Islands, specifically about the
bill. And you were saying about—can you discuss the importance
of the capital improvement project grants in CNMI, and how these
capital improvement project dollars aided during Typhoon Yutu
recovery efforts? If you can—and remember, I have just 4 minutes.
So, if we can be concise so I can do other questions.
Lieutenant Governor PALACIOS. The capital improvement issue
that I brought up is actually a funding that was under the provi-
sion of our covenant, our agreement with the Federal Government,
to come into the U.S. family of $27 million a year. Somehow, some-
where, some time that disappeared. I don’t know why it dis-
appeared, how it disappeared. But the fact of the matter is that
today, instead of $27 million, the Commonwealth only gets $9
million to do infrastructure development.
Some of those monies now go to our brothers and sisters in
Guam, our brothers and sisters in American Samoa, and our broth-
ers and sisters in the Virgin Islands, and I think even Puerto Rico.
We don’t want to take those monies back from our brothers and
sisters in these other insular areas. We want and we would like to
see if Congress would consider increasing the level of that funding
for the insular areas, so that everybody has a bigger piece of this
pie.
Miss GONZÁLEZ-COLÓN. Lieutenant Governor, I know that tour-
ism is one of the biggest areas in your economy, and I don’t know
if the Department of the Interior is helping you out, considering
the coronavirus and many other things in the Pacific, as well. But
in terms of the territorial assistance line item, which of the pro-
grams, in terms of technical assistance, maintenance assistance,
coral reef initiatives, among many others, which one of them is the
most important one, the most that CNMI get more benefits from?
Lieutenant Governor PALACIOS. It is the CIP money, $9 to $15
million, and perhaps the technical assistance program.
Miss GONZÁLEZ-COLÓN. I am going to do kind of the same ques-
tion to the Honorable Governor of Guam. You ask in your state-
ment for support for an increase in the territorial assistance.
Which program under that umbrella is most helpful to Guam?
Governor GUERRERO. I would say they are all three equally
important. But I think, for the most part, the technical assistance
is very important, because it provides us with help in whatever
projects that we are going through. For example, automation is
one, and just maybe analytics and data collection, so we can have
a much better understanding of our issues in Guam.
I believe they are all equally important, but if I had to choose,
I would say technical assistance.
Miss GONZÁLEZ-COLÓN. I would never put you to choose, but I
just want to know which one of them is the most important in
terms of helping you out, has the most positive impact. I was
thinking about when we went there, we saw the brown tree snake
control program, among many others. See, I remember.
So, if you can have some of those programs specifically, you say
technical assistance. And I will go back now to the U.S. Virgin
Islands.
Governor, I know tourism for you, as well, is one of the most im-
portant tools. What is the U.S. Virgin Islands doing, actually, to
34

cope with the situation in terms of the industry recovering from the
hurricanes?
And what advantages for the U.S. Virgin Islands in the budget
are included, in terms of the budget that is included there?
Governor BRYAN. We don’t see any direct benefit to the budget.
But on the other question, I think at this point in time, the coral
reef is very important, only because we have a new blight in the
Caribbean. That is, we really don’t have an answer, and no one has
an answer for it. The reefs also sustained damage in both storms.
And I know Puerto Rico was getting some money—and then it
stopped at FEMA—for coral reef repair and revitalization.
The CIP money is very important to us, too, but at this time we
have a lot of other Federal aid that helps along with that. And it
just patches those little holes that we don’t have local money for,
or Federal funding. But the coral reef is something that we really
need to bump up and pay attention to as we move forward.
Miss GONZÁLEZ-COLÓN. Thank you. I yield.
Mr. SABLAN. I thank the Ranking Member. I next recognize the
distinguished gentleman from Guam, Mr. San Nicolas, for 5
minutes.
Mr. SAN NICOLAS. Thank you, Mr. Chairman. I want to begin by
thanking you for your leadership on this Committee, and also
thanking you for your leadership with respect to our recent
achievements on our Medicaid funding. I know that you have been
working with that for many years.
I would also like to thank my colleague to my left, Congress-
woman Plaskett, for her leadership in pushing for the EITC issue
for many years.
I would like to thank our Ranking Member and our colleague of
Puerto Rican descent for our Puerto Rican brothers and sisters al-
ways being here for us, as well; and our brother from Hawaii,
thank you so much also, as well, for always looking out for the
needs of our territories.
I was very interested to listen to the responses to the question
from my Chairman with respect to economic development initia-
tives that were discussed today. I think that, as much as we want
to secure more Federal funding for the needs of our territories, our
ability to grow into our own capacity is something that is going to
benefit all of us, regardless of whether or not we are going to be
successful in securing legislation for more Federal funding.
And I wanted to just inform the governors that one of the things
that I am going to be working on is something that we worked on
earlier with respect to trying to secure an office of territorial
exporting within the Export-Import Bank of the United States.
Right now, there is no specific focus on territories. That is about
$145 million of export-import financing support that has not been
reaching territories.
I know that my colleague from Puerto Rico has about maybe 30
different companies that have been able to avail of that. But as far
as the U.S. Virgin Islands, the Commonwealth of the Northern
Mariana Islands, and Guam, we have still not been able to tap into
that resource. Hopefully, we can get that legislation through the
Financial Services Committee. But in the meantime, I think that
it will be great for the respective administrations to begin looking
35

at that opportunity, so that we can begin to align local policy with
Federal policy.
One of the things that has allowed us to be successful in this
past year for something as dramatic as Medicaid, is the fact that,
if we are able to identify common denominators within each of the
territories, and focus our energies on advocating for that specific
common denominator, then we are not taking as much of a shotgun
approach. We are able to laser in and actually make some major
achievements.
So, I wanted to ask the governors, because I know that you all
had your own individual lists of needs. And we are not going to ne-
glect those lists, but if the governors can come together and inform
us of what they can agree on as a common denominator that all
of us up here can advocate for within our respective capacities.
Governor Bryan, I guess you can go ahead and begin.
Governor BRYAN. Thank you. I think, immediately, Medicaid is
one that is really huge. And then the other one is the visa waivers.
We have been asking for that for quite some time. They are the
GILTI tax changes in the law that make other tax incentive areas
that are foreign more attractive than we are. I think those are
three right off the cuff that would give us that sustainability, and
give us the ability to do a lot of things.
Mr. SAN NICOLAS. Is the EITC something that is a major issue
that the Virgin Islands wants to have addressed here by this body?
Governor BRYAN. To make out how important that is, it accounts
for almost 40 percent of our tax returns in any given year. We are
behind a year-and-a-half. This past year we kind of made a record
with $70 million in tax returns. It is more than have ever been re-
turned in the Virgin Islands in one year. But we are still——
Mr. SAN NICOLAS. Thank you, Governor. I don’t mean to cut you
off, but I do have limited time. Thank you, Governor.
Lieutenant Governor Palacios?
Lieutenant Governor PALACIOS. Thank you. I was just listening
to some of the testimonies of the two governors. Actually, Governor
Lou mentioned something regarding Federal payment, taking con-
trol of the EITC issue so that the territories don’t have to be bur-
dened with this requirement, whereas in the mainland United
States, the Federal Government pays out.
This is a very, very critical amount of funding for our govern-
ments. And if we are burdened with this, that is one issue that I
believe I can get on. Right now we don’t pay that.
But in my very brief discussion yesterday with my Congressman,
he said we are actually risking being sued by somebody in the
Northern Marianas on this particular issue. And I can assure you
we will most likely lose. In that regards——
Mr. SAN NICOLAS. Governor, I don’t mean to cut you off, but I
do want to afford my governor a quick opportunity to respond.
Lieutenant Governor PALACIOS. Thank you.
Mr. SAN NICOLAS. Thank you.
Governor GUERRERO. Yes, thank you very much. Of course,
Medicaid is a benefit of all that. We did write a letter uniting to-
gether in this common issue, and I am going to look forward to also
coming forward with the EITC issue, as it does affect each of us.
36

And Congressman, I have been in communication with the
Governor from the U.S. Virgin Islands, and I have been in commu-
nication with the Governor from the CNMI, so——
Mr. SAN NICOLAS. Thank you, Mr. Chairman, I yield back.
Mr. SABLAN. Thank you, Mr. San Nicolas.
Mr. Soto, sir, you have 5 minutes.
Mr. SOTO. I am all about empowering our U.S. territories. And
with that spirit in mind, I yield to the gentleman from Guam.
Mr. SABLAN. The gentleman has 5 minutes.
Mr. SAN NICOLAS. I thank my colleague. Thank you.
So, as we were discussing that common denominator of EITC, I
think that that is something that we all should begin rallying
around. I would like my colleagues to just kind of put that on no-
tice, because the EITC, I know for Guam, accounts for about one-
third of the total tax refund liability paid out by the territory of
between $56 to $60 million. So, you are talking about 30 percent
of a component on the Guam tax refund budget, 40 percent on the
U.S. Virgin Islands.
Lieutenant Governor Palacios, I know that on the CNMI they re-
cover the EITC by taxing it back. So, I am not even sure if it is
necessary to make any changes, because if the language is written
that the rebate would still kick in, then even if we taxed it back,
you would still get that rebate on top of it.
I am glad that the governors were able to share with us that par-
ticular common denominator on EITC. And I would just like to put
my colleagues on notice, because that is something that actually we
were able to move forward recently. And I know that my colleague
to my left spoke very passionately about some components of that
particular bill. I know that my colleagues from Puerto Rico were
very active in getting that bill passed through the House, H.R.
5687.
And that key language in there that also addressed the EITC for
our territories is language that I am hoping we are going to be able
to protect if the bill goes into conference. And if we run into any
kind of problems getting the bill through, because the Administra-
tion has already signaled that they have issues with it, I am hop-
ing that my colleagues can help us to find additional avenues for
our EITC concern to still be able to find that channel.
Because one of the very significant things about having that lan-
guage pass through H.R. 5687 is that it at least indicates that
Members of the House of Representatives are open to allowing for
that kind of language to be included, not just in the recent legisla-
tion that was passed, but any future legislation that we may be
able to find a vehicle for.
With that, I don’t want to use up all of my colleague’s time. I will
yield back to my colleague from Florida.
Mr. SOTO. I reclaim my time and yield to the gentlelady from the
Virgin Islands.
Ms. PLASKETT. Thank you very much for your cooperation and
support of the territories all of the time.
Mr. SABLAN. The gentlelady is recognized.
Ms. PLASKETT. Thank you so much, sir. I wanted to ask,
Governor Bryan, you talked a little about the coral and how
37

important it is. What effect would the decaying coral reef have on
tourism that fuels our local economy?
Governor BRYAN. The Virgin Islands is home to several national
monuments, including the one on St. John and the Buck Island
National Monument in St. Croix. Depletion of this coral not only
harms us in terms of our tourism product—the wall at St. Croix
is not only a national monument, but it is also a world-famous div-
ing site. The depletion of our coral not only hurts our tourism prod-
uct, but hurts our fisheries, hurts our ability for our fishermen to
make a living. As you know, the parrot fish is one of the fish that
feed off the coral. That would be greatly affected by this blight.
Furthermore, the scope of this is way beyond our capabilities as
an island, and we have been finding it difficult just to identify and
get the support. We continue to be plagued by invasive species and
blights.
The lionfish is still a problem for us. The blight now in the coral,
a second blight that we are discovering now, and also we have re-
cently been invaded by boas, and we have a real boa problem on
the island that we never had seen before on St. Croix.
Ms. PLASKETT. Thank you. Under the President’s Administration
budget request for Fiscal Year 2021, under the Coral Reef Initia-
tive in OIA’s budget, it is proposed to cut that coral reef program
by $1.6 million. Will that have an effect on your work to sustain
the coral reef?
Governor BRYAN. It will absolutely have an effect. Even though
we have been bolstered by the Nature Conservancy trying to grow
coral in small farms, this blight is something that we weren’t deal-
ing with before. As a fisherman, a hobbyist fisherman and spear
fisher, I could tell the difference in the coral reefs from the time
I was in high school to then in 1989, with the storm.
Buck Island had just begun to come back almost 30 years later,
and now we have had great damage to the reefs again. The waters
pound and break the coral reefs and they fall over, and it takes
them a really long time to recover. And that damages fishing
grounds, fish and wildlife, and, as I said, the tourism.
Ms. PLASKETT. Thank you.
Mr. SOTO. I reclaim my time and yield back.
Mr. SABLAN. Thank you very much. And just for the record, the
cut to the Coral Reef Initiative and natural resources in their pro-
posed budget is 64 percent from, like the gentlelady said, $2.6
million cut to $946,000.
I now recognize the gentleman from Hawaii, Mr. Case, for 5
minutes.
Mr. CASE. Thank you very much, Mr. Chair. And it is truly an
honor for me to be a member, together with my colleagues here of
our Island Jurisdiction Caucus, and my colleague to my immediate
right from Florida. He is an honorary member, so he is partici-
pating here, too.
Look, this is pretty serious. Yesterday, we saw the President’s
budget. And I assume that you have all taken at least a prelimi-
nary look at it. And if you haven’t, it is devastating to the Office
of Insular Affairs. It is a reduction, again, of somewhere around 20,
25 percent. That is after the prior year, in which the same thing
38

happened, and Congress had to restore the funding to the Office of
Insular Affairs for a number of different projects.
We see here that technical assistance is reduced very signifi-
cantly, from $20 million to $14 million. Maintenance assistance,
from $4 million to $1 million. The brown tree snake control, $3.5
million down to $2.8 million. Coral Reefs, as the Chair just noted,
$2.6 million down to $950 thousand. Emerging insular commu-
nities, $6.2 million down to $2.8 million. And a complete zeroing
out of the discretionary Compact Impact aid, a complete zeroing
out of $4 million of Compact Impact aid. Now, there is mandatory
Compact Impact aid, but there is discretionary over and above
that, and that is what this Administration has gone after.
And it puzzles me. I don’t know if that is the right word—I am
amazed. I don’t understand it. There seems to be some level of ac-
tual animus inside somewhere in this Administration to Federal
funding to our territories through the Office of Insular Affairs. And
I don’t know whether any of you have any explanation for it.
Is this some miscommunication between our territories and our
Federal Government?
Is it a lack of advocacy inside the Administration? Because cer-
tainly Congress is favorable to this funding. We have restored it
and increased it in many areas.
And it is a little bit of a rhetorical question I am going to leave
you with, because I want to ask you, Governor Guerrero, some very
specific questions about Compact Impact aid, which we share a
great concern about. You spoke earlier about Compact Impact aid,
and about how strongly you felt about that. I think the figure is
that we both get $14 million—or have, at least in mandatory
Compact Impact aid. CNMI gets a little bit, as I recall. And that
is about it for Compact Impact aid.
My state’s direct expenses for Compact Impact assistance are
quantified at $187 million. I think your colleague, my colleague
here, as I recall, Congressman, quantified it somewhere in the
range of $200 million. So, we are talking about the same amount.
You have more Compact residents. And in some cases your cost dif-
ferential is correct.
Would you say that that is—and we have, by the way, taken the
position, collectively, that in the renegotiation of the Compacts, we
are not willing to just roll over and accept and ratify—which is
Congress’s obligation, and duty, and choice—another set of
Compacts as they come up for renegotiation, unless there are sub-
stantial increases in Compact funding. Would you agree with that,
Governor?
Governor GUERRERO. I certainly do. And I am very thankful for
your passion and your advocacy for it.
Governor Ige and myself are in communications of how we can
calculate it so that GAO becomes much more favorable to maybe
looking at our report and giving us more confidence and credibility
in our reports.
We average about $115 million a year. And if you extrapolate
that out, it is almost to a billion. We are very concerned about it.
We see it in our public safety, we see it in our health, and we see
it in our education.
39

But I also want to say that we welcome our brothers and sisters
to help improve their quality of life. But I think the Federal
Government has a responsibility to help us along with that, as we
are not part of the negotiations, and decisions are made without
our input.
Mr. CASE. Governor, we are intending to insert ourselves into the
negotiations on this point, and already have. Because if we simply
do what we did the last time around, your bill and my bill is going
to be well over a couple hundred million within a very short period
of time. And that is unfair to both of us.
Governor Bryan, my time is up, but I appreciate your comments
on the coral reefs, as well. This is a major area of funding that has
been slashed. We have the same goals in the oceans that we live
and work and play in. And we are completely supportive of—I am
completely supportive of your comments, as are many Members of
Congress. Thank you.
Mr. SABLAN. Thank you. The gentleman’s time is up.
Again, just for the record, the Department of the Interior’s Office
of Insular Affairs has decreased every line item on their budget, ex-
cept for their operations, the office. Everything else is a decrease.
But they gave their operations, the cost of operations, an increase.
We are going to have a second round of questioning.
Oh, I am sorry. I apologize sincerely. I recognize the distin-
guished gentlelady from the U.S. Virgin Islands, Ms. Plaskett, for
5 minutes.
Ms. PLASKETT. Thank you. I first want to thank you for allowing
me to be a part of the Committee testimony today. I think it is so
important, these discussions, and I am grateful for the care that
you take in addressing the issues of the territories in this
Committee.
One of the things that I wanted to ask, as you know, so many
of us are dealing with recovery from natural disasters—the
Northern Marianas, Puerto Rico, as well as the Virgin Islands.
Governor Bryan, what are some of the primary issues that the
Virgin Islands may be having with Federal agencies involved in
their recovery, like FEMA and HUD?
Governor BRYAN. Thank you, Delegate.
First of all, one of the major things for us is power, energy in
the Virgin Islands. Our power bills are four times that of the aver-
age of the Nation. It was very disruptive for us for HUD to take
out the ability for us to use CDBG-DR funds, community grant
funds, to use to help us rebuild our power systems and create a
cheaper, more efficient power in the use of propane, as well as
solar and other things that we are doing.
The other thing that I keep pressing is the 10 percent waiver.
It really doesn’t make sense for FEMA to require us to have a 10
percent match, and then us to take the money out of HUD. That
is the same community development block grants that the Federal
Government is giving us to pay it. It is not like we are paying it
out of our own.
And then last——
Ms. PLASKETT. Excuse me, could you tell us how much money,
then, that you would have to use of your own CDBG grant funding
to utilize for the 10 percent?
40

Governor BRYAN. That would be about $500 million, which is
over 25 percent of the money that we are being granted in order
to make the 10 percent grants, which makes absolutely no sense.
Ms. PLASKETT. When this body, Congress, gave the authority for
those agencies to waive that statutory requirement?
Governor BRYAN. That is correct—$550 million is more than 75
percent of our general fund budget. That is a lot of money.
The other piece is there has to be a different approach. FEMA
is good at response, but they are not so good at recovery. Island
nations cannot be forced to wait 10 years to recover. We have
storms that come every season. This is Year 2—we are in Year 21⁄2,
and we still haven’t finished our temporary hospital. We need to
have an expedited way so we skip all of these NEPA, Army Corps,
and all of the other processes, and be able to rebuild our schools,
hospital, roadways, infrastructure in a quick way.
Ms. PLASKETT. I know one of the things that you have talked
about is on the island of St. John, which is really important to this
Committee on Natural Resources, the relationship with the
national parks. That also leads to issues that local residents have
on St. John with property tax. I know that you have a proposal to
address that. Would you like to share that with this Committee?
Governor BRYAN. There is a real terrible relationship now by the
people who live on St. John and the Park Service. It is—66 percent
of the land on St. John is park land and can never be developed
or built on. This creates the unintended consequence, a very in-
flated land price. An acre of land on St. John can go for a million
dollars, just raw land.
That creates a situation where you are having a high tax impact
on St. Johnians who have large tracts of land. Because of this
million-dollar acre next to you, you have 20 acres, your land taxes
could be $30,000–$40,000 a year, while the Federal Government
only pays $30,000 for all the land they have in the Virgin Islands,
including that in St. John. If there was a mechanism that allowed
for St. Johnians to benefit from that Federal land being there by
an investment in their infrastructure, whether it be in their
schools, their hospital, or their recreational facilities, it would
soften the blow and make people understand.
Also, the Delegate has a piece of legislation to stop the Park
Service from buying any more or taking on any more land in St.
John. The park is big enough. They have way more land than they
will ever use. And I ask you to support the Delegate’s measure in
Congress.
Ms. PLASKETT. Thank you. Is there anything else you wanted to
share with the Committee in the remaining time that I have?
Governor BRYAN. The one thing that I always stress is that no
matter what state you are in, you are probably going to be a victim
of disaster. When you compare Puerto Rico’s place to where we are
in the Virgin Islands, you can see where we are far ahead, not only
because we are good, but because Puerto Rico has many layers of
government, and it is very complicated to get that aid to where it
needs to be. That is the same type of situation you are going to be
in in your state, when you get into a disaster.
The Virgin Islands is a good place to test programs that expedite
the Federal recovery process, so that when it happens in your
41

state, it won’t take you 10 years to get back to where your
residents once were. Thank you, Delegate.
Ms. PLASKETT. Thank you. I know that Congressman Graves and
I have a piece of legislation that we have in the Transportation and
Infrastructure Committee to expedite that process, and we are
hoping to get that to the Floor some time.
Thank you so much, Mr. Chairman, for the opportunity.
Mr. SABLAN. Thank you. And you don’t mind going to a second
round, Governors?
Thank you. OK, we are going to have a second round. I yield
myself 5 minutes.
And just a commentary on Mr. Case’s comments about the
Department maybe having some kind of an agenda against the ter-
ritories. I will say that I am not sure, because it hasn’t always been
like this. We have an Assistant Secretary in the room, and he
came, he consulted Delegates, he consulted us about what we
thought about his plans. So, it was not always like this.
Mr. CASE. Would the Chair yield, just for a quick comment?
Mr. SABLAN. Yes.
Mr. CASE. I certainly didn’t want to—my comments were very
non-specific as to where the problem is. And I have always found
the Department of the Interior and the folks that work in DOI to
be very committed to the territories. So, I suspect strongly that the
issue as to why this funding continues to be cut lies in another
area than the actual Department of the Interior.
Mr. SABLAN. So, I will go back. Congress provided $20.8 million
for—let me go to Compact Impact.
The Pacific governors know that the Federal Government made
an error in how it counts the number of freely associated states
immigrants—in Hawaii, Samoa, Guam, and the Marianas. So, as
a result, the OIA has proposed cutting what Samoa, what Guam,
and the Marianas get in Compact Impact to make up for what
Hawaii did not get in past years. Hawaii should get more money.
But the other insular areas should not have to pay for OIA’s
mistake.
Lieutenant Governor Palacios, Governor Guerrero, do you think
we should reduce the administrative budget of OIA or the
Secretary’s budget to make up for their mistake, rather than
making you pay?
[Laughter.]
Mr. SABLAN. Yes or no?
Governor GUERRERO. Oh, is he yielding to me? I really believe I
do not agree, and I strongly oppose any kind of deductions from our
Compact.
First of all, we have never been over-funded. And one of the com-
ments made was that we were over-funded the last 4 years as a
result of not having correct census numbers.
Mr. SABLAN. That wasn’t your mistake, Governor.
Governor GUERRERO. It was not my mistake.
Mr. SABLAN. So, do you think that your Compact Impact money
should not be cut, and——
Governor GUERRERO. I do not believe it should be cut.
Mr. SABLAN. So, your answer is no.
Governor GUERRERO. No.
42

Mr. SABLAN. OK, thank you.
Governor GUERRERO. Absolutely not.
Mr. SABLAN. Lieutenant Governor Palacios?
Governor GUERRERO. And could I just say Governor Ige agrees
with me?
Mr. SABLAN. Lieutenant Governor Palacios, yes or no?
Lieutenant Governor PALACIOS. No.
Mr. SABLAN. OK, thank you. Let me ask you also, does your
administration, does the Northern Marianas provide reports on the
cost of housing, Compact Impact migrants, as required?
Lieutenant Governor PALACIOS. Costs?
Mr. SABLAN. Yes.
Lieutenant Governor PALACIOS. Cost of housing?
Mr. SABLAN. I mean hosting.
Lieutenant Governor PALACIOS. Oh, hosting. We do submit a re-
port to OIA for the small amount of funding that we get, from
Compact Impact——
Mr. SABLAN. No, I am a small census count of how many COFA
citizens reside in the Marianas. I think we have been negligent,
Governor, at this point. Guam has been reporting——
Governor GUERRERO. Guam has more, yes.
Mr. SABLAN. On this count, the Northern Marianas has not been
a part, so we actually wrote a letter asking the Governor to come
back in compliance with the law.
Lieutenant Governor PALACIOS. I will take a look at that.
Mr. SABLAN. Yes. But I have no scruples in getting up and
amending the next fiscal year budget, which, to be very honest,
would probably be next January. It would be between the Election
Day and the new year, the new Congress.
But let me also ask—well, I have 40 seconds. Congress provided
$20.8 million for technical assistance to the insular areas last year
and this year, but the Administration keeps trying to cut it. This
year it is $14.7 million. We are going to work hard to increase that
money.
OIA hands out technical assistance money in response to re-
quests from governors and others. Congress gives them free reign.
But I want to ask whether you would prefer more control of the
money. Would you like us to take some of the technical assistance
slush fund and put it into implementing specific programs—the
coral reef, the Compact Impact, the CIP money? What do you
think?
My time is up, but you could respond, as quick as possible, and
then I will yield.
Governor GUERRERO. I wouldn’t mind putting it in other projects,
but would like to give input in where we can prioritize that.
Mr. SABLAN. Thank you.
Lieutenant Governor PALACIOS. That could be a workable
solution.
Mr. SABLAN. Thank you. I now yield to Miss González-Colón for
her 5 minutes.
Miss GONZÁLEZ-COLÓN. I will reserve.
Mr. SABLAN. You could yield.
Miss GONZÁLEZ-COLÓN. No, I reserve.
Mr. SABLAN. She reserves. She won’t give it to me.
43

[Laughter.]
Mr. SABLAN. So, she will give it to Mr. San Nicolas. You have 5
minutes.
Mr. SAN NICOLAS. Thank you, Mr. Chairman. Hopefully, she is
reserving so she can give it to me.
But I wanted to follow up with your line of questioning, Mr.
Chairman, and your commentary with respect to the concern about
the Compact funding error that the Administration is going to be
looking to recover. And I wanted to put on the record, Mr.
Chairman, that we need to be very, very cautious about the kind
of precedents that the ‘‘solution’’ is going to set with respect to
what this is going to entail.
If the census is making errors in counts, and those errors in
counts are resulting in some areas getting over-funded and some
areas getting under-funded, how we address that census error, I
think, is going to set a precedent in this case with respect to every
other census error that may happen in the future.
For example, if the census makes an error in the counts for vet-
erans in a number of states, and that impacts the funding available
for veteran services in the various states, are the states then going
to take the reductions in future veteran funding in order to offset
miscounts by the census in prior years?
Those are the kinds of things that I think need to be put on the
table, because right now it is very easy for territories to just be
thrown this very roughshod solution of ‘‘Oh, well, we overpaid you
then. We are just going to underpay you now.’’ But if we are going
to be looking at fairness in terms of the allocation of dollars with
respect to census counts, then we need to understand that if we are
going to be doing this to the territories today, every other state
that may be impacted by a census miscount in the future would
have the door open to having the same consequence.
And I don’t think that territory should suffer this consequence
today, any more than states should suffer a similar consequence to-
morrow. If there was an error in census counts, the census budget
should absorb that error, and this body should open up the possi-
bility of appropriating not just the funding for the census, or for
the census activities, but also backstop funding for any census
errors that need to be corrected as a result of funding
misapplications.
Another precedent that we all seem to be very mindful of, Mr.
Chairman, is if we insist on that, if we insist on going back and
reducing the funding for territories as a result of miscounts in the
past, then when our territories finally do come up with a formula
that properly prices the cost of the Compact Impact, then equally,
Mr. Chairman, the precedent should be that we should go back to
all those prior years and correct the funding that was not properly
allocated as a result of those costs.
So, let’s put that on the table in this hearing today, Mr.
Chairman, that not only is this conversation about a simple mathe-
matical solution to a funding problem, it is about precedents. What
kind of precedents are we going to set, and how we are going to
impact territories with respect to that precedence?
As a closing, Mr. Chairman, on that subject of Compact Impact,
I wanted to afford our governors an opportunity to clarify certain
44

statements, because I know that in the dialogue it was expressed
that we were over-funded in Compact Impact over those prior
years. But the reality is for all these years we have been grossly
under-funded in Compact Impact. So, I wanted to afford our gov-
ernors an opportunity to speak to Compact Impact funding, how
short it actually has been with respect to the actual costs to the
territories.
Governor GUERRERO. It has been tremendously short. We have
never been over-funded, we have never been overpaid. To give us
only $14 million a year for an expenditure of about $150 million
a year, $30 million in health care, $68 million in education, and the
remainder in public safety, to say that is really an injustice to our
island. We have always been working very hard and struggling to
get our due expenses.
And exactly, we are not, and I totally agree with my Congress-
man in his comments and his analysis of the Compact Impact
monies.
Mr. SAN NICOLAS. Lieutenant Governor Palacios, did you want to
chime in?
Lieutenant Governor PALACIOS. Compact Impact has been an
issue of contention ever since it was implemented. At one point, we
were up in arms because we had a lot of migrants from the free-
state—FAS citizens. But obviously, the issue has become larger in
the territory of Guam and Hawaii.
So, whatever could be done to address the issue needs to be done.
We cannot continue to see this issue linger on in the CNMI, in
Guam, and now the state of Hawaii. Thank you.
Mr. SAN NICOLAS. Thank you, Governor. I yield back, Mr.
Chairman.
Mr. SABLAN. Thank you. I now recognize the Delegate from the
Virgin Islands, Ms. Plaskett.
Ms. PLASKETT. Thank you.
Governor Bryan, I wanted to give you some time to discuss the
issue of an idea that we have been talking about, which is a special
visa waiver program similar to what has been given in Guam, and
in the Pacific area. How would that be supportive and beneficial to
the economy of the Virgin Islands?
Governor BRYAN. One of the things that I discussed today at the
IGIA was how both of our islands are in places where they are sur-
rounded by foreign countries. While we regularly look to the United
States for support, whether in tourism, or business, or investment,
there are 60 million people in the Caribbean at any given time.
Because we are not a country, we can’t negotiate with any of those
countries, we can’t trade with any of those countries fairly, and we
can’t exchange commerce.
There is a huge potential for us, because we are in the English-
speaking Caribbean, for health care to be provided. One of the
things that has adversely impacted us since the storm is our hos-
pitals I mentioned aren’t together yet. We are paying upwards of
$250,000 per person to fly individuals from the Virgin Islands to
Florida for emergency care, per person. If we were able to expand
our hospital systems and the care that we are able to provide in
the Caribbean, it would open us up to a lot of new traffic that
45

would come to us on the English-speaking Virgin Islands, rather
than go to Miami, which is much further away.
Also, there are over a million other tourists cruising around in
the Caribbean who are coming from European ports that come to
the Virgin Islands and can’t clear in time because it takes too long.
If we had the special visa waivers, these people would be able to
disembark off those boats, and be able to participate in our econ-
omy, and thereby boost our tourist numbers—not only boost them,
but there are days in the Virgin Islands when there are no ships
at the ports, and then there are other days where they are totally
clogged. So, it is feast or famine. It would help us to better utilize
our ports and see a new customer come to the Virgin Islands,
bringing in dollars that are otherwise being spent in foreign ports.
Ms. PLASKETT. Yes, I know you talked about the hospitals, rather
than people from other islands—Saint Kitts, Antigua—going to
Canada, or to London, or other places, they would utilize the Virgin
Islands for healthcare benefits. Even our children would be able to
compete on a level playing field, rather than having to come—it is
much cheaper to go to another island than it might, in some
instances, to go to Miami or other places.
Governor BRYAN. Right.
Ms. PLASKETT. But one of the things that I didn’t hear discussed
at IGIA, which you might have an opportunity here to talk about,
is some of the initiatives or support that this Congress can give you
in terms of dealing with your retirement pension plan, and support
that couldn’t be coming from us, as the Virgin Islands Government
has to deal with the large issues with this retirement program in
the same way that Northern Marianas and some of the other
places have had to deal with that in the past.
Governor BRYAN. There are over 8,000 people on our current gov-
ernment retirement system right now, and over 9,000 people in the
government. That is 17,000 people that rely on this retirement
system directly, and probably 34 percent or 40 percent—34,000 to
40,000—who rely on it indirectly. That is 40 percent of our popu-
lation that depends on this system being viable.
Currently, we have a $2.8 billion shortfall—anywhere from a $1
billion to $2.8 billion, depending on whose math you are using. The
recaptures of the gasoline tax would be the first part in providing
a steady funding stream in order to float a bond that we would
hope that Treasury would be willing to extend to us in order to put
a billion-dollar base in that retirement system.
We are not looking for a straight handout. We are just looking
for a situation where maybe we would get 10 years interest only,
and then start to pay back the principal. That would give us
enough time for the system to catch itself. We are not simply just
throwing money into it. We have our other plan that downgrades
the system and allows for a 401(k) program to be re-instituted,
rather than padding up a retirement system that we know is not
sustainable, and that we can’t afford.
Ms. PLASKETT. Lieutenant Governor Palacios, I know that
Northern Marianas has dealt with this in the past. Is there any
insight you want to give us with regard to how to save a govern-
ment retirement system?
46

Lieutenant Governor PALACIOS. Well, somebody took us to court
and got a court injunction that we have to pay, make sure that we
pay at least 75 percent of those pensions.
That was one of the most difficult situations that I have ever
faced as Lieutenant Governor. Thirty days after I got in, the pen-
sion trustees called me up. I actually e-mailed the governors that
we are not going to pay, we are not going to push the button to
pay the retirees unless you can come up with $5 million by
Tuesday afternoon. Those are the type of horror stories that we
have. But we have put ourselves on a payment schedule, and that
becomes a priority in our budget.
Can we use the help to pay for those obligations in the past?
Definitely. But we don’t want to keep coming to the Federal
Government for help.
Ms. PLASKETT. Thank you. I don’t think it is the intention of any
of the territories to ask for handouts, we are just asking for equity
and the tools to be able to sustain and grow our economies.
Thank you so much, Mr. Chair.
Mr. SABLAN. Thank you, Ms. Plaskett. And now the gentlelady
who has reserved her 5 minutes is recognized for 5 minutes.
Miss GONZÁLEZ-COLÓN. Thank you, Chairman. I know we have
been discussing many, many issues here. And one of the issues
that has been part of the discussion is that requirement that now
relies on the hands of the local governments to make the estimates
for the migrants that used to be part of the Department of the
Interior, and then they changed it to allow you to do that without
reimbursement of the cost of doing that.
And I think, having the discussion, we should go back to the law
President Reagan signed, allowing those goals to be part of the
DOI. And in that sense, if not that, at least the reimbursement of
the funds you are using to make those calculations.
But I want to, in terms of—another area that we can work with
is in the renewal of the Compacts that Secretary Pompeo is saying
are going to be renewed in a few months. We should include that
opportunity. That is something that we have on the horizon, and
should be included there. And thanks to God we have this kind of
a hearing just to get all that information together, and do it in a
bipartisan way.
Another area that I just want to mention—and I said it at the
beginning of the hearing—is the issue of the cockfighting. I know
that, in the case of Puerto Rico, it has been a tough issue, because
it is part of our economy, and it has been legislated. It is a state-
regulated economic area since 1922, so this is not new. This is
highly regulated. We have judges, a complete industry around the
cockfighting. So, that amendment was passed. And I remember
Stacey Plaskett and I were on the Floor when that was discussed,
and an ultimate-minute amendment.
So, in the case of Puerto Rico, we did a new legislation in
December of last year allowing this to be treated as a state issue,
not interfering with the interested interstate commerce. But again,
as territories, we don’t have Senators, we don’t have many
Members with votes on the Floor of the House.
So, I just want to tell you that anything that we could do to-
gether to push for this, and how this is impacting our economies
47

and our way of life, should be really appreciated. I know we may
not have enough time to discuss this issue, but if you can do some-
thing in terms of writing, let’s have a meeting or something. All the
Delegates, I need to say we were all on the same page on this
issue. We even filed and dropped a bill regarding this. Nothing has
happened in the Committee of Agriculture. So, we should push
together again to see if we can have at least a 1-year or a 2-year
waiver to see the economic impact of banning that kind of industry.
That is what we are asking. That legislation was approved without
any study of the impact of that ban in our respective territories,
as well.
One last issue, in the case of Puerto Rico, we do have an erosion
problem in our beaches. And we managed to secure some funds
from the Army Corps of Engineers to make a study in that sense.
And I know all islands should have the same situation, specifically
U.S. Virgin Islands and us.
And I congratulate the U.S. Virgin Islands in getting access to
the CDBG-DR funds immediately. In our case, as you may say, we
have several layers. And plus to that, an Oversight Board, and plus
to that we have a monitor, and plus to that we have an inspector
for all of those agencies. So, everything is getting longer to get
access to those funds.
What should be the main issue to develop the economic activity?
Will it be in tourism, will it be in manufacturing for all of the terri-
tories, should it be CDBG funds, should it be to be treated as equal
in all Federal programs? If we can have that decision today,
Governor Guerrero, what will be Guam’s choice?
Governor GUERRERO. I think we should create a different funding
source called ‘‘Territories Economic Development Improvement,’’
and to focus primarily on our each unique ways of our economic
development.
For us, of course, tourism is one of the biggest drivers of our
economy. And I am very concerned about the issue of the
coronavirus, because it is already affecting our economy in terms
of cancellations.
So, maybe we should think more creatively and create a different
funding source, and create a different funding unit to, say,
economic development for the territories, or tourism.
Miss GONZÁLEZ-COLÓN. I know my time has expired, but I will
really appreciate, Lieutenant Governor Palacios and Governor
Bryan, if we can continue this conversation later on, in terms of
writing or a phone call. I will really appreciate it.
Thank you. I yield back.
Mr. SABLAN. Thank you very much. I now recognize the
gentleman from Florida, Mr. Soto.
Mr. SOTO. Thank you, Mr. Chairman. Before, I thought it would
be appropriate to give your Delegates my time, because 5 minutes
just isn’t enough. Even 10 minutes.
But I want to welcome you all. Some of you traveled for hun-
dreds of miles to get here, and others thousands. And we welcome
you.
In Florida, we have some of the same issues you all are facing.
We are just a giant state with these disaster relief issues, reef
48

issues, pythons, lionfish, and we have bills that we are working on
in this Committee to address some of those things.
We heard about the disaster relief already. And when I think
about everything from Super Typhoon Yutu, to Hurricanes Irma
and Maria, to Super Typhoon Hagibis, all of you have either seen
destruction or had close calls regarding disaster relief. So, it is
something we are going to continue to work on.
And with reefs, I have a bill with my Puerto Rican sister here,
Miss González-Colón, and with Mr. Case and others, that we are
hopeful, with movement in the Senate, we are going to see pass
through, this bill, as well as we have python hunts in Florida, and
we have a lionfish bill that many of us have co-sponsored, as well,
that we are hopeful to address some of those issues.
But I want to follow up on what Resident Commissioner
González-Colón had talked about, which is how could we promote
some of these high-growth industries. And I am going to first start
with Governor Bryan.
What would probably be the industry with the most potential
right now in the Virgin Islands that we could assist to really boost?
Of all the industries you are working on.
Governor BRYAN. Oh, financial services. If we were to get those
tax issues closed, it would have the most immediate impact.
And then, of course, the visa waivers. It might come to you as
some surprise, but Congresswoman Colón can tell you that you
need to clear Customs to go to Puerto Rico. I can’t sail to Culebra
from St. Thomas without getting cleared by Customs. That is
ridiculous.
And on the BVI, it is the British Virgin Islands. You could swim
from St. John to Tortola, and you need to clear Customs. So, using
the waivers in this sector would be tremendous for us.
And then the flexibility of funds. We know, on a micro level,
where funds would best be utilized. Grant us the ability to use
them for energy, especially. That would solve a lot of problems.
Mr. SOTO. One Caribbean, one love, and many visas. That is a
disgrace. We have to fix that.
Lieutenant Governor Palacios, it would be great to hear. What do
you think is probably the biggest high-growth industry you see?
And how could we help?
Lieutenant Governor PALACIOS. Well, earlier today in my state-
ment, I stated that tourism is the one and only industry. And its
vulnerabilities are very obvious.
But there are policies that we have been working on, thanks to
Congressman Sablan, who has been helping us with our labor
issue, to make sure that the industry doesn’t all of a sudden col-
lapse because of sudden applications of Federal labor policies. He
has introduced and had Congress pass legislation that became law
about a year or 2 years ago. Yet, Federal agencies have yet to pro-
mulgate rules and regulations to implement those on labor. I
believe he has two legislation or laws already.
So, sometimes it is prodding the Federal agencies required to
assist us in those policies to help with our industries and the vul-
nerability of industries.
49

Mr. SOTO. Thank you, Governor. Because my time is limited, I
want to make sure Governor Guerrero—what do you anticipate, the
highest growth industry right now, and how we could help?
Governor GUERRERO. Our high growth industry right now, I
think, continues to be tourism, although I am looking to diversify
it, and I am really focusing on aquaculture to be a main improved
industry in Guam. And agriculture. So, budget monies for OEI, if
you would not have any decrease in any of those, especially in the
technical assistance, would be great. And even increase it, so we
can have some Department of Agriculture research and data and
so forth, in terms of developing aquaculture and agriculture in our
island.
Mr. SOTO. Thank you so much, and I yield back.
Mr. SABLAN. Thank you, Mr. Soto. I now recognize the gentleman
from California, Mr. Cox.
Mr. COX. Thank you so much, Chairman.
I just want to say to Governor Bryan, we had the pleasure this
morning in Ag Committee to meet Sommer Sibilly Brown, the
Founder and Executive Director of the Virgin Islands Good Food
Coalition. You have a great one there, and her testimony was very,
very helpful for looking at farmers markets.
But I would like to yield my time to the Chairman, Mr. Sablan.
Mr. SABLAN. OK, thank you, Mr. Cox. Let me just, again, be-
cause the team at IGIA was economic development, supposedly,
and sometimes it takes more than just money to assist the terri-
tories. I mean I can speak for the Northern Marianas. Lieutenant
Governor Palacios and I had a conversation yesterday. Regulations
for two of the three workforce acts are way overdue.
Lieutenant Governor Palacios, I need to confirm this, but it has
always been my position that the construction workers—3,000 con-
struction workers—do not need regulations, because we already
have a workforce regulation that they are using. Of course, they
need to go to the Department of Labor, but not new regs for that.
I need to confirm this, because we found out today that I was cor-
rect the whole time. But don’t quote me on that, because you never
know.
Lieutenant Governor PALACIOS. That would be great.
Mr. SABLAN. Things like the Jones Act, I mean Puerto Rico has
been asking for that. Guam has been asking for that for a while.
We need the assistance of our main advocates in the Administra-
tion to get something moving.
I am not saying that we can get it done immediately, but get in-
formation out there, because educating, informing Members of
Congress, informing agencies in the executive branch, this is some-
times, it is very important. I know, I have gone through that,
where I have to talk to many Members of Congress to make them
understand. I spoke to Mr. King of Iowa for 6 months, trying to
make him understand about the immigration program in the
Marianas, why it is different from the Nation.
I never could understand why Delta could fly from Narita to
Saipan and back to Narita, and fly from Narita to Guam and back
to Narita, and not be able to pick up passengers between Guam
and Saipan. That is something that I would really like to go in
50

again and try to see if we could get that. It needs legislation, I
would say.
But those are policies that would help the territories a lot, and
if it works, worth more than the technical assistance money put to-
gether. Just give the territories the policy tools that they need to
develop themselves and help themselves pick up. And because
there is also a sense of pride in knowing that we did something,
that we helped ourselves, to improving our economy, the lives of
our community.
And the cockfight, everybody went to bat on that one. We were
not successful. I am telling you, the vote was like, wow, 400-
something to very little. But in 2014, I was able to take it out of
the farm bill then. And it wasn’t easy because Jim McGovern was
a member of the Committee, and I had to convince him to let it
slide, but this time it was just a really difficult thing.
I know in Puerto Rico it is like a $100 million-a-year industry.
In the Marianas, I think you have 90 licenses. In the Marianas,
there are three licenses, one in Saipan, one in Tinian, and one on
Rota. The amounts are very small. And I am not sure about Guam.
I know there are more.
Again, we are continuing to carry on our work on the Medicaid
issue. We want to be—for the Marianas, at least, I have the 6-year
program so that we could get our Medicaid office to put together
the reporting system, electronic system, and the fraud system, so
that they meet all their requirements of getting into the full pro-
gram, and SSI, and those kind of things for everybody, because we
have it and the rest don’t.
But please know that we work together, we work hard here. And
we don’t give up. If we get turned down today, we ask again
yesterday.
So, again, thank you very much, governors, for coming. And I
have to go through this script now, so please excuse me.
The members of the Committee may have some additional ques-
tions for the witnesses, and we will ask you to respond to these in
writing.
Under Committee Rule 3(o), members of the Committee must
submit witness questions within 3 business days following the
hearing, and the hearing record will be held open for 10 business
days for these responses.
If there is no further business, without objection, the Committee
stands adjourned. Thank you very much.
[Whereupon, at 3:50 p.m., the Committee was adjourned.]

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