Palau Compact

The U.S. and Palau governments concluded their Compact of Free  Association in 1986, and the compact entered into force on October 1,  1994. In addition,  U.S. agencies—the Department of Education, the Department of Health  and Human Services (HHS), and Interior, among others—provided  assistance to Palau through discretionary federal programs as authorized  by U.S. legislation and with appropriations from Congress. FSM and RMI Compacts

			1986 Compact

The 1986 Compact of Free Association between the United States, the  FSM, and the RMI provided a framework for the United States to work  toward achieving its three main goals: (1) to secure self-government for  the FSM and the RMI, (2) to assist the FSM and the RMI in their efforts to  advance economic development and self-sufficiency, and (3) to ensure  certain national security rights for all of the parties. Compact Migration

The compacts provide for FAS citizens to enter and reside indefinitely in  the United States, including its territories, without regard to the  Immigration and Nationality Act’s visa and labor certification  requirements. In the 2003 amended compacts’ enabling  legislation, Congress authorized and appropriated $30 million annually for  20 years for grants to Guam, Hawaii, the CNMI, and American Samoa,  which it deemed affected jurisdictions, and authorized additional  appropriations. Proposed Legislation Would Change Palau Assistance Schedule and Improve Prospects for Compact Trust Fund

If enacted, S. 2610 would approve, provide funding for, and make  modifications to the September 2010 agreement between the  governments of the United States and Palau regarding their compact. This increase would be in line with the lower than  scheduled amount of annual U.S. assistance that has been provided to  Palau since 2011. Specifically, Congress has not passed legislation to  approve the agreement, and Interior has provided Palau with a total of  $78.88 million in direct economic assistance from annual appropriations— $13.147 million in each fiscal year from 2011 through 2016. S. 2610  would make the following changes to the contribution schedule:
Rescheduling U.S. contributions to Palau’s trust fund, with a $20  million contribution in fiscal year 2017, $2 million annually through  fiscal year 2022, and $250,000 in fiscal year 2023. Lack of reliable performance data. According to Census enumerations  of migrants in three affected jurisdictions—Guam, Hawaii, and the  CNMI—the total number of compact migrants in those jurisdictions  increased from about 21,000, estimated in the 2003 enumeration, to  about 35,000, estimated in the 2013 enumeration (see fig. Three Affected Jurisdictions Report That Cost Impacts Far Exceed Compact Impact Grants

In fiscal years 2004 through 2016, affected jurisdictions received  approximately $409 million in compact impact grants to aid in defraying  their costs due to the residence of compact migrants. 5 shows the affected jurisdictions’ reported annual costs of  services to compact migrants.) We have previously found that the three affected jurisdictions’ cost  estimates contained a number of limitations with regard to accuracy,  adequate documentation, and comprehensiveness. Compact Trust Fund Contributions and Grants to the Federated States of Micronesia and Republic of the Marshall Islands

Figure 6 shows the annually decreasing U.S. grant funding to the  Federated States of Micronesia (FSM) and Republic of the Marshall  Islands (RMI) and increasing U.S. contributions to the FSM’s and the  RMI’s compact trust funds in fiscal years 2004 through 2023. Appendix III: U.S. Assistance to Palau as Outlined in 2010 Agreement and Proposed in Senate Bill 2610

Senate Bill 2610 (S. 2610) would modify the schedule of U.S. assistance  to Palau specified in the 2010 agreement between the U.S. and Palau  governments, which has not been implemented. Table 4 shows the  assistance schedule for fiscal years 2011 through 2024 outlined in the  2010 agreement.
Why GAO Did This Study

U.S. compacts with the FSM and the RMI entered into force in 1986 and were amended in 2003. A compact with Palau entered into force in 1994. Legislation pending before the Senate would approve, provide funding for, and make modifications to a 2010 agreement between the U.S. and Palau governments regarding their compact.
Under the compacts, the United States provides each country with, among other things, economic assistance—including grants and contributions to a trust fund; access to certain federal services and programs; and permission for citizens of the three countries to migrate to the United States and its territories without regard to visa and labor certification requirements. Guam, Hawaii, the Commonwealth of the Northern Mariana Islands, and American Samoa, which are designated in law as jurisdictions affected by compact migration, receive grants to aid in defraying the cost of services to migrants.
This testimony examines (1) the potential impact of the proposed legislation approving the 2010 Palau agreement, (2) challenges affecting implementation of the FSM and RMI compacts, and (3) migration from the FSM, RMI, and Palau and its impacts on U.S. areas. For this statement, GAO summarized previous reports issued in 2007 through 2013 and incorporated updated information from Palau, the Department of the Interior, and affected jurisdictions. GAO is not making any new recommendations in this testimony. GAO has made recommendations in its prior reports, some of which have not yet been addressed.

What GAO Found

If enacted, Senate Bill 2610 (S. 2610) would change the schedule for U.S. assistance to the Republic of Palau and improve prospects for Palau's compact trust fund. S. 2610 would approve a 2010 agreement between the U.S. and Palau governments and provide annual assistance to Palau through 2024. Congress has not approved legislation to implement the 2010 agreement, which scheduled $216 million in U.S. assistance for fiscal years 2011 through 2024. Since 2011, the United States has provided $79 million in economic assistance to Palau through annual appropriations. However, this amount was less than anticipated under the agreement and has not included trust fund contributions. S. 2610 would modify the agreement schedule to provide the remaining $137 million in fiscal years 2017 through 2024, including a $20 million trust fund contribution in 2017 and smaller contributions in later years (see fig.).
U.S. Assistance to Palau Provided in Fiscal Years 2011-2016 and Proposed by Senate Bill 2610 for Fiscal Years 2017-2024
The Federated States of Micronesia (FSM) and Republic of the Marshall Islands (RMI) face challenges to achieving the compact goals of economic growth and self-sufficiency. GAO previously found that neither country has made significant progress on reforms and compact implementation has been characterized by unreliable performance data and by accountability and oversight challenges.
GAO has previously reported on the growth of migrant populations from Palau, the FSM, and RMI in U.S. areas as well as the reported impacts of these compact migrants. In Guam, Hawaii, and the Commonwealth of the Northern Mariana Islands—areas Congress has deemed affected jurisdictions—compact migrants increased from about 21,000 in 2003 to about 35,000 in 2013. In fiscal years 2004 through 2016, the Department of the Interior provided approximately $409 million to affected jurisdictions to aid in defraying costs, such as for education and health services, attributable to compact migrants. In contrast, affected jurisdictions estimated costs of $2.1 billion for these services in 2003 through 2014. However, GAO has noted that these estimates have limitations related to accuracy, documentation, and comprehensiveness.