PALIKIR, POHNPEI. October 07, 2024 – During its recently adjourned Fifth Regular Session, the Congress of the Federated States of Micronesia enacted a congressional measure to establish criteria and procedures to allow the withdrawal of funds from the Compact Trust Fund.
Passage of Congressional Act (CA) 23-132, established legal guidance, criteria and procedures for a state or the national government to request the withdrawal of funds from the Compact Trust Fund according to the provisions agreed to in the 2023 Trust Fund Agreement (TFA). The Act spells out the process and requirements for a state government to submit a request for a distribution to the FSM National Government, which after review then submits the request to the Joint Trust Fund Committee (JTFC). According to the 2023 TFA, distributions from the Compact Trust Fund are only allowed under certain circumstances and if certain criteria are met. The established criteria for distribution requests are:
- Resiliency Distribution pursuant to Article 18 of the 2023 TFA;
- Special Needs Distribution pursuant to Article 19 of the 2023 TFA; or
- Unspent Economic Assistance Distribution pursuant to Article 20 of the 2023 TFA.
Resiliency Distribution
According to Article 18 of the 2023 Compact Trust Fund Agreement, Resiliency Distribution funds can be used in the Compact sector grant areas to address increase in costs due to inflation. Any remaining money not used to cover inflation costs may be used for the environment and infrastructure sectors.
An annual deadline of July 15 is set for the national government to submit a Resiliency Distribution budget request to the Joint Trust Fund Committee. The budget request must include a detailed description of:
- Total amount requested, including the amount being requested to help offset inflation and any additional amount beyond the inflation adjustment for environment and infrastructure sectors;
- Description of how the amount will be used and allocated among sectors Proposed expenditures; and
- For any amount allocated to the infrastructure sector, a description of which projects included in the Infrastructure Development Plan(IDP) would be funded.
The JTFC as set, must issue a decision by August 30th to approve, partially approve or deny the request.
Special Needs Distribution
According to Article 19 of the 2023 Compact Trust Fund Agreement, Special Needs Distribution funds can only be used in the Compact sector grant areas to address ‘unforeseen singular expenses of the FSM Government relating to projects that cannot reasonably be financed from other sources of revenue.’ The budget request must include a detailed description with:
- The amount requested;
- A description of how the amount would be used only for unforeseen singular expenses relating to projects in support of the sectors described in Section 261(a) of the 2023 Amended Compact; and
- An explanation of why other sources of revenue cannot be used for such expense.
Unspent Economic Assistance Distribution
According to Article 20 of the 2023 Compact Trust Fund Agreement, Unspent Economic Assistance Distribution means a transfer of funds from the Compact Trust Fund to support Compact sectors or other sectors as mutually decided by the Governments of the US and the FSM. A request for an Unspent Economic Assistance Distribution can be made at any time, and should include the following:
- Total amount requested;
- Description of how the amount would be allocated among the sectors;
- Proposed expenditures;
- description of how the allocation would further one or more of the multiyear objectives of the relevant sector as well as one or more of the goals and broad strategies as described in the approved Strategic Development Plan; and
- For any amount allocated to the infrastructure sector, a description of which projects in the IDP would be funded.
Congressional Act No. 23-132 has been transmitted to the President to sign into law or it automatically becomes law 30 days from transmittal.
* * *