New methodology urged for calculating Compact Impact funding for Guam

Congressman Michael San Nicolas (PNC file photo)

Guam – The Department of Interior has announced the release of $34 million in Compact Impact funding, and, as expected, Guam and Hawaii got the lion’s share of the funding with Guam getting $16.8 million and Hawaii getting $14.9 million.

However, that’s as far as the similarity goes. Congressman Michael San Nicolas pointed out, during a congressional hearing on the Department of Interior’s budget, that while Guam and Hawaii both get relatively the same amount of Compact funding, Hawaii has one advantage that Guam does not have — Earned Income Tax Credits paid for by the federal government.

For this reason, San Nicolas has called for the creation of a new methodology in the calculation of Compact Impact funding for Guam – one that would take into account the unfunded Earned Income Tax Credit mandate that requires Guam to pay EITC even without federal funding.

 “So both Guam and Hawaii are receiving the same amount of Compact Impact in order to assist the local governments in handling the costs associated with hosting Compact migrants as a result of the treaty of the Compact of Free Association. However, there is one very distinct difference between Hawaii and Guam with respect to compact migrant costs and that is the Earned Income Tax Credit,” San Nicolas said.

He added: “The Earned Income Tax Credit in Hawaii is actually funded by the US Treasury and so any compact migrant who qualifies for the Earned Income Tax Credit … that’s actually money that comes into Hawaii from the U.S. Treasury. On Guam.”

According to San Nicolas, Guam has been absorbing its Earned Income Tax liability since 2008. And so any migrant worker as a result of the treaty that’s receiving the EITC is actually drawing down those funds from Guam’s coffers.

“So the $892 provided per migrant for Guam and for Hawaii I’m assuming is formulaic-based as determined by the department. But if that formula is also factoring in the economic contribution of the migrant worker, then the Earned Income Tax Credit liability of those workers also need to be factored in. And I don’t think that’s something that this government has really paid attention to,” San Nicolas said.

During the hearing, San Nicolas directly asked U.S. Department of Interior Secretary David L. Bernhardt if he is aware whether or not the Earned Income Tax liabilities are being factored into the formula for the determination of Compact Impact. Bernhardt’s answer was not entirely satisfactory.

“I don’t have a good answer for you but I am more than willing to figure out if it should be appropriately factored in or if we need to work with Treasury on it. I don’t want to get into a question about the allocation of funds between two representatives but it seems like an anomaly that has not been thought of … but we’ll look into the bottom of that,” Bernhardt said.

Bernhardt then promised to work with the office of San Nicolas and the U.S. Treasury department to resolve the issue.