20% of Revenue Discussed
PALIKIR, Pohnpei (FSM Congress): October 28, 2002 - The Secretary of the FSM Department of Finance and Administrations, Honorable John Ehsa, requested the Committee on Ways and Means, in a hearing October 25, to repeal the law that provides the 20 percent revenue sharing to the four states in the FSM.
The 20 percent revenue law, Public Law No. 10-68, took effect in 1999 after a failed referendum initiated by the states to increase the 50%/50% revenue sharing between the national and state governments to 20%/80% of the local revenue favoring the state governments.
This law allowing the states to receive 20% of the revenue on top of the 50% has conditions attached that the additional 20% to the states would be used only for their health and educational capital improvement programs. It also requires the states to provide reports to Congress and the Department of Finance and Administration.
In discussing the 20% with the committee, the officials of the department stated that the money is problematic to them, especially in controlling and reporting it, not like the CIP where disbursement of funds is based on applications submitted to the Budget Office. At present, not all of the states have submitted reports as required.
The states are given $14,988,737.47 from fiscal years 1999 to 2002 in that 20% sharing of revenue. $1,396,217.10 to the State of Kosrae, $2,859,243.85 to the State of Yap, $3,899,625.31 to the State of Chuuk and $6,833,651.21 was provided to the State of Pohnpei. A state could spend its share of this 20% in any way it sees fit as long as it is within the scope provided by the law creating it. "How do we know these monies were spent within the required scope?" Not all of the states have reported to the department or to the Congress its usage of the funds. These funds should not have been given to the states, as stipulated by Public Law No. 10-68 unless all the conditions are met.
Secretary Ehsa told the committee that the FSM National Government is in terrible need of money, especially in preparation of the proposed amended compact. He said Congress should allow the return of the money even if it is for only one year.
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