"Commonwealth" Abandoned, Status Vote Set On Decolonizing Options... Bush's Budget Provisions For Puerto Rico And Acevedo's Record...

February 6, 2004
Copyright © 2004 THE PUERTO RICO HERALD. All Rights Reserved.

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"Commonwealth" Abandoned, Status Vote Set On Decolonizing Options

Territory that the United States took from Spain by war in 1898 has scheduled a referendum this November among the possible options for its decolonization:  U.S. statehood; independence; and free association (national sovereignty with a non-binding power-sharing arrangement with another nation).  The association would be with the U.S.

Guam's Commission on Decolonization told the United Nations Decolonization Unit last month that the vote would be "a plebiscite . . . to determine" the future political status of the island even though the vote is not authorized -- and may well be struck down -- by the U.S. Government.

At issue is that the vote will be limited to the territory's Chamorros, the population group that developed in the Mariana Islands.  (Guam is the southernmost island in the chain, a part of the Pacific Ocean's Micronesian islands.)  Other registered voters -- also U.S. citizens -- ostensibly will not be able to vote.

The issue has been a bone of contention between Guam's Decolonization Commission and the federal government for years.  The race-based discrimination has been opposed as unconstitutional by federal authorities and is expected to be struck down in federal court.

Chamorros are a majority of the territory's electorate but only a plurality of the population.  They control the local government but leaders are concerned that they will eventually lose control to other population groups because people born on U.S. soil are U.S. citizens.  Other groups on the island include:  Filipinos, many of whom are U.S. citizens; U.S. citizens whose origins are in the States; citizens of the three Micronesian nations that have free association arrangements with the U.S.; and Taiwanese.

Local Guam law holds that only Chamorros should determine the territory's ultimate status because other residents have exercised "self-determination" by migrating to Guam.  It contends that only the people that inhabited the island when the U.S. invaded have never exercised "self-determination."

A Commission letter to the U.N. asserted that "The Administering Power [the U.S. Government] continues to ignore the right to self-determination of the colonized Chamorros."

The letter also antagonized federal officials by requesting that the U.N. "send a mission to monitor" the vote.

The Guam and Puerto Rico "Commonwealth" Proposals

Guam's local government settled on a vote on the options for a permanent and fully democratic status for the territory after abandoning a dozen-plus-year "quest" for federal "Commonwealth" legislation.

The bill was less radical and more astutely crafted than the status proposal of Puerto Rico's "commonwealth" party but it, too, would have granted national government powers while retaining the benefits of a U.S. status.  Similarities with the proposal of Puerto Rico "commonwealth" party president Anibal Acevedo Vila include grants of the powers to determine the application of federal laws and to enter into binding agreements with foreign governments.

The Guam bill did not try to pretend, however, that naming the territorial government "the Commonwealth" would end the island's status as an unincorporated territory of the U.S.  Nor did it try to claim that the arrangement could be permanent.

Acevedo and some other Puerto Rico "commonwealthers" pretend that Puerto Rico is not an unincorporated territory because its local government constitution names the local government "the Commonwealth" and that the U.S. is permanently bound to the territory.  The U.S. Supreme Court and Justice and State Departments, among other federal authorities, hold that Puerto Rico continues to be U.S. territory.  Its political status is not permanent.

By contrast, the Guam "Commonwealth" legislation would have recognized Guam's continuing temporary, territorial status.  It would have, therefore, authorized the referendum on the island's ultimate political status limited to Chamorros that Guam has now scheduled.

The bill raised a host of objections from a U.S. House of Representatives staff task force, a task force of officials of the administration of President George H.W. Bush, and the administration of President Bill Clinton.  All of these federal entities had tried to accommodate Guam's concerns to the extent possible, but could not agree to Guam's key "Commonwealth" proposals.

The federal objections included limiting voting rights to only some U.S. citizens, excluding others, as well as the cession of national government powers.

The objections continued during the Clinton Administration despite Guam's governor at the time having a close relationship with Clinton and raising a reported $900,000 for the then president's 1996 re-election.  The Governor publicly acknowledged that the purpose of the funds was to obtain more favorable positions on the legislation.

Guam's Self-Determination Commission is headed by the territory's governor and includes majority and minority party leaders of its legislature among other island leaders.

Bush's Budget Provisions for Puerto Rico and Acevedo's Record

President Bush submitted his proposed budget for the fiscal year that begins October 1st to the Congress on February 2nd.  With a projected deficit of over half a billion dollars in Fiscal Year 2005, the budget proposes cuts in some social welfare and community assistance programs, substantial increases in national security programs, and making permanent the temporary tax cuts made earlier in Bush's presidency.

Special Initiatives for Puerto Rico

Bush budget documents released to date include two special initiatives for Puerto Rico.  Both were proposed but not approved by the Congress last year.

The most substantial of these, however, is well on its way to congressional approval, although, possibly, in modified form.  The initiative would extend the temporary increase in the amount of federal excise taxes collected on rum produced outside of the States that is transferred to Puerto Rico and its neighboring U.S. territory, the U.S. Virgin Islands.

The federal government taxes liquor at $13.50 per 'proof gallon.'  Under longstanding law, $10.50 per 'proof gallon' of the collections is transferred to the two territories.  The territories each receive the collections on rum that they produce.  They also share the collections on rum produced in foreign countries.  This is due to an amendment enacted into law 20 years ago when federal tariffs on rum from qualified Caribbean Basin nations were eliminated.

A Clinton Administration initiative temporarily increased the amount of the transfer to $13.25 per proof gallon to help Puerto Rico recover from a devastating hurricane (Hurricane Georges), capitalize an endowment for the Puerto Rico Conservation Trust, and help the Virgin Islands tackle a crippling deficit.

At the insistence of then House Ways and Means Committee Chairman Bill Archer, 25 cents per proof gallon of the collections were retained by the federal government to counter claims of Puerto Rico 'commonwealthers' that the transfers were an entitlement due to the federal-territorial governing arrangement.

Ways and Means Committee staff members at the time questioned whether any of the collections should be transferred to the territories. The territories now have local revenue raising potentials that they did not have when the transfers were first authorized.  Additionally, the States do not receive the assistance.  But the committee aides said that these issues would be considered at a later time.

Last year, Bush proposed extending the temporary increase in the transfer for two years until December 31, 2005.  Puerto Rico Resident Commissioner Anibal Acevedo Vila, the "commonwealth" party's president and now gubernatorial candidate, was unable to convince his U.S. House of Representatives colleagues -- even Republicans otherwise supportive of Bush -- to extend the increase for more than one year.

The Puerto Rico Conservation Trust, however, succeeded in persuading the Senate Finance Committee to extend the increase for two years.  Legislation the committee passed February 2nd would also increase the transfer to the full $13.50 amount of the collections from the beginning of fiscal year 2005, October 1, 2004.  The further increase would apply through the end of the temporary increase:  the end of calendar year 2005.

Additionally, as of October 1st, the legislation would require Puerto Rico's local ('Commonwealth') government to further transfer 50 cents per proof gallon to the Conservation Trust.

The intent of the $2.75 per proof gallon increase that expired December 31st was that one-sixth -- 46 cents per proof gallon -- would be granted to the Trust to build up a fund that could subsidize the Trust's operations in perpetuity.  This was agreed upon by then Puerto Rico Governor Pedro Rossello and Resident Commissioner Carlos Romero Barcelo, both members of the local statehood and national Democratic political parties, President Clinton, and, later, congressional leaders.

Concerns about the transfer under Puerto Rico's current governor, Sila Calderon ("commonwealth"/no national party), prompted the Senate committee to propose requiring it rather than simply relying on the local government to make it without being required to do so.

The legislation is a provision of a bill that would primarily finance federal road and rail transportation that is being debated in the full Senate at the time of this writing (February 6th).  The House provision is a part of a tax bill that passed the House on November 20th (apparently without Acevedo being aware of it).

Bush's budget estimates that its proposal would increase the transfer to Puerto Rico $79 million in fiscal year 2005.  The Congress' Joint Committee on Taxation estimated that the Senate committee provision would increase the transfer to Puerto Rico $93 million in FY2005.  The FY04 increase was estimated at $58 million.

If Bush's proposal is approved, his budget estimates that Puerto Rico will receive $382 million in rum tax transfers in FY05, a $10 million increase from FY04.  If the president's proposal is not approved, the budget estimates transfers to Puerto Rico at $303 million, $11 million less than in FY04.

Acevedo last year failed to convince his congressional colleagues to approve even a part of Bush's other special initiative for Puerto Rico:  special funding to improve drinking water infrastructure serving the San Juan metropolitan area.

Bush had proposed a grant of $8 million for improvements that would enable 1.4 million people "to receive drinking water that meets public health standards for high risk contaminants."  Acevedo, however, did not place a priority on the proposal and failed to obtain any of the funds.

When the Congress pointedly rejected the funding, he said Puerto Rico could borrow the funds from the Environmental Protection Agency.  Governor Calderon said that, if needed, the insular government would pay for the improvements.

Bush's FY05 budget, however, proposes that the federal government grant Puerto Rico $4 million, half the amount he proposed last year.

Acevedo last year also failed to obtain from the Congress tens of millions of dollars in U.S. Army Corps of Engineers water projects funding that Bush agreed to for Puerto Rico.  Details of Bush's FY05 Corps of Engineers proposals have not been released yet.

Other 'Special' Assistance

Temporary assistance for Puerto Rico is provided through tax credits that companies based in the States can take against taxes on income that they attribute to insular operations.  This assistance is scheduled to expire December 31, 2005, as a Bush budget document noted.  It was terminated because it was found to provide much greater benefits to companies than to Puerto Ricans.

Bush's budget estimates that the tax credits will cost the federal government $1.1 billion in FY05, versus $1.15 billion in FY04.  The Congress' Joint Taxation Committee has estimated the FY05 cost at $1.2 billion, $100 million more than Bush's budget.

Special grants for the construction of Tren Urbano, a new commuter rail system linking Bayamon, Guaynabo, and San Juan is another area of temporary special aid due to an initiative of then Governor Rossello and then President Clinton.  Bush's budget includes $54.8 million of a multi-year commitment that Clinton made to the project at Rossello's request.  Efforts by Acevedo and Calderon to have the commitment expanded have failed.

Transferring federal customs duties collections in the islands minus the costs of collecting the duties to Puerto Rico's local government is a regular form of special assistance.  Bush's budget estimates that the transfers will be $89 million in FY05, and increase of $2 million from FY04.

Bush's FY05 budget includes $1.443 billion for the food for the needy (Nutrition Assistance Program) grant that Puerto Rico receives instead of the more generous Food Stamps program.  The amount is $30 million more than the current fiscal year.  The increase is due to increased costs of food.  Acevedo's public claims of obtaining greater increases were proved to be false last year.

Republicans Join Democrats in Criticizing Bush's Budget

Bush's budget proposal drew greater than usual criticism from a number of Republicans in the Congress as well as predictable condemnation from Democrats.  Republican criticisms included House Appropriations Committee Chairman C.W. "Bill" Young (FL) saying that proposed elimination of some 'discretionary' projects contradicted congressional priorities.  Many Republicans objected to the proposed unprecedented size of the federal deficit.  The criticisms were of the same nature -- although not as strong -- as the complaints from Democrats.

Another widespread criticism was that the budget did not reflect all of the proposal's costs, particularly the cost of rebuilding Iraq.  Bush Administration officials said the cost would be disclosed after this year's elections.

'Discretionary' programs are those which the Congress and the President  regularly adjusts rules and funding.  They comprise only about 17% of the federal budget.  The rest is considered to be 'mandatory' programs, operations for which funding is automatic each year under laws that are rarely revised.  The mandatory programs include entitlements, programs in which the beneficiaries of the spending are considered to be entitled to it.

Puerto Rico's Share of Regular Discretionary Programs

A document from the President's Office of Management and Budget identified the assistance proposed in social welfare and regular community assistance programs by State and territory.  The total assistance for Puerto Rico in the programs is $2.25 billion, $75 million less than in the current fiscal year.

The FY05 amount is .67% of the total budget for the programs.  The dollar amount for Puerto Rico is greater than the total amounts for 15 States but Puerto Rico's population is more than that of 24 States and is 1.34% of the national population.  These figures demonstrate Puerto Rico's overall lesser treatment than the States in federal assistance programs.

The lesser treatment is made possible by the Commonwealth's territorial political status.  Unincorporated territorial status enables the federal government to legally treat Puerto Rico differently than the States in programs.  It also denies Puerto Ricans voting representation   i.e i.e., political power -- in the federal government.

Puerto Rico, however, receives program funding on the same basis as the States in many programs.  This is shown by share of the funding of a number of  programs which are greater than the territory's 1.34% share of the national population.  In most cases, the larger percentages are due to the high percentage of very low-income people in Puerto Rico -- 50% of the territory's population.

The Bush budget's funding for Puerto Rico estimates for the selected social welfare and community assistance programs follows.  The FY05 amounts are immediately after the name of each program.  The subsequent numbers in parentheses are the FY04 amounts.  Puerto Rico's share of the total costs of the programs is the last number listed for each program.

Medicaid - $210,100,000 ($219,397,000 -- The FY04 grant was higher because of a special additional appropriation to all States and territories) .11%

State Children's Health Insurance Program - $38,953,000 ($30,297,000) .95%

School Lunch Program - $122,866,000 ($119,706,000) 1.81%

Women, Infants, and Children Nutrition Program (WIC) - $175,734,000 ($172,844,000) 3.66%

Elementary and Secondary Education Title I Grants for Low-Income Students - $533,825,000 ($502,587,000) 4%

Special Education - $103,151,000 ($123,636,000) .93%

Vocational Rehabilitation Grants - $67,753,000 ($65,225,000) 2.51%

Temporary Assistance for Needy Families (TANF) - $71,035,000 ($71,035,000 -- Puerto Rico receives a fixed amount in the basic federal welfare program) .41%

Child Support Enforcement - $33,582,000 ($33,466,000) .77%

Low Income Home Energy Assistance - $2,161,000 ($2,148,000) .12%

Child Care and Development Block Grant - $42,788,000 ($42,538,000) 2.04%

Child Care and Development Fund - $0 ($0) 0%

Child Care and Development Matching Fund - $0 ($0) 0%

Head Start - $249,156,000 ($247,073,000) 3.62%

Foster Care - $14,553,000 ($14,159,000) .3%

Public Housing Operating Fund - $94,143,000 ($94,536,000) 2.6%

Housing Choice Vouchers - $150,430,000 ($163,076,000) 1.13%

Public Housing Capital Fund - $144,966,000 ($185,915,000) 5.83%

Community Development Entitlement Block Grants - $74,915,000 ($75,036,000) 2.48%

Community Development Block Grants States and Small Cities Programs -$55,621,000 ($55,710,000) 4.26%

Airport Improvement Program - $8,687,000 ($8,592,000) .28%

Highway Planning and Construction - $0 ($0 -- But $45,568,000 in FY03) 0%

Federal Transit Fixed Guideway Modernization Grants - $3,401,000 ($4,972,000) .21%

Federal Transit Urban Area Formula Grants - $20,024,000 ($92,889,000) 1.25%

Federal Transit Formula and Research Grants - $32,392,000 ($0 -- This is a replacement program) $1.25%

Tax Proposals

The tax proposals in Bush's budget request include two measures that would be significant for Puerto Rico.  One is an extension of the Research and Experimentation Tax Credit.  This tax credit was extended to Puerto Rico at the initiative of then President Clinton and then Governor Rossello.  The other is a proposed new Tax Credit for Developing Affordable Housing.

The "Washington Update" appears weekly.

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