Babauta junks bill stripping his CIP authority

Gov. Juan N. Babauta has disapproved a bill that essentially strips him of his spending authority over federal grant funds.

Babauta vetoed House Bill 14-144, which seeks to require legislative approval prior to the use of federal funds, which include capital improvement project funds obtained through the Covenant and the Compact Impact compensation.

In his eight-page veto message, Babauta said the bill “impermissibly encroaches upon the authority of the U.S. Congress to appropriate federal funds” as it amends the CNMI law related to the use of “federal grant funds” to require legislative approval on “state” level prior to the expenditure of such funds.

Babauta cited that in a U.S. case, King v. Smith, the court ruled that “the federal government, unless barred by some controlling constitutional prohibition, may impose the terms and conditions upon which its money allotments to the states shall be disbursed, and…state law or regulation inconsistent with such federal terms and conditions is to the extent invalid.”

“As such, the CNMI government cannot place restrictions on eligibility for federal funds and use of the funds that are inconsistent with the federal government’s restrictions on the funds,” said Babauta, noting that, if signed into law, the bill “would be rendered invalid pursuant to the supremacy clause of the U.S. Constitution.”

In his letter, the governor said that requiring legislative approval for 702 funds is consistent with the intent of the U.S. Congress in previous Covenant 702 funding agreements, including the 1992 702 agreement, which involved the expenditure of local funds.

But he said that section 703 of the Covenant states that “funds provided under Covenant 702 are to be considered local funds only to the extent that they are used as the local share required to obtain federal programs and services.”

He said that the current seven-year 702 funding agreement, signed on Feb. 9, 2004, “does not require local matching funds and unambiguously provides that the CNMI Executive Branch is the grantee and spending authority for all federal funds to be used for CIPs.”

The U.S. Congress, he said, in approving the current 702 funding agreement, acknowledged the importance of continued consultation between the CNMI Executive Branch and respective legislative delegations in submitting CIP spending for the Commonwealth.

He said his administration “takes this responsibility seriously and continues to work with the respective legislative delegations.”

On mandating legislative approval for the expenditure of federal funds from the Compact Impact funds, it would also be “inconsistent with the intent of the U.S. Congress as expressed in the Compact of Free Association Act of 1985,” which was adopted by the U.S. Congress in 1986.

As it is, he said, Compact funds do not require local matching and are “subject to the expenditure of the Executive Branch of the respective entities that are eligible to receive the funds.”

Babauta said the administration is cognizant of the concerns expressed by members of the Legislature on the expenditure of Compact money, which he said, have special restrictions that require strict compliance and cannot be utilized for purposes other than those specified: education, public health, safety, and related infrastructure.

The governor said his office will work with the Legislature to ensure full compliance with the law.

He said the administration would submit reports to both the U.S. Congress and the CNMI Legislature on Compact spending.

Further, Babauta raised the following concerns if legislative approval is required prior to the expenditure of federal funds:

• it may violate the terms and conditions imposed on grant money, which may jeopardize the CNMI’s eligibility for future grants;

• it may cause delay in the use of funds appropriated by the U.S. Congress for specific purposes; and

• it would make it extremely difficult to comply with accounting and reporting requirements.

H.B. 14-144 was authored by House Speaker Benigno R. Fitial.

The CNMI government gets some $12 million to $13 million a year in 702 CIP funds.

For five years beginning fiscal year 2004, the CNMI is entitled to $5.1 million in Compact money from Congress.

After the five-year period, Congress would make another computation on the funding share of the CNMI, depending on the size and impact of Freely Associated States citizens in the local economy.

The CNMI shares some $30 million Compact funding a year with Guam, Hawaii, and American Samoa.

The U.S. Congress had passed a bill appropriating a total of $600 million for the host state and territories to be spread out at $30 million each fiscal year from 2004 until 2023. Before this, the CNMI used to get only over $500,000 compact funding a year.