Arngel Formula

An agreement reached at the Arngel State and National Leadership Conference (SNLC), between the FSM National Government and the four FSM States. This was intended as an equitable distribution of amended Compact funding, agreed upon during the 2nd Chief Executive Council.

The Arngel Formula, also called the "Yap Agreement," was signed by the FSM Congress Speaker, President Simina, each State’s Speaker, and the four FSM State Governors.

Background

Over the twenty years of the second round of Compact economic assistance, from 2003 to 2023, the FSM saw significant growth in the size and scope of its national government. At the same time, state operations modestly contracted, though public goods and services continued to be delivered exclusively at the state level. With the four states reliant on Compact Assistance, the national government began collecting unprecedented funds from fishing licenses, captive reinsurance, and other non-Compact sources.

Public attention to the growing size and scope was drawn during the COIVD era, with unprecedented powering being exercised by the Palikir-based National Government. This led to well-published spats with the state legislatures and executives who argued they only the states had the authority to limit or allow travel restrictions and otherwise respond to the threats of COVID.

Constitutional Amendment

In mid 2023 voters passed an amendment to the FSM Constitution requiring the revenues from fishing agreements to be divided equally between the National and State Governments.

The Four Resolutions

The SNLC concluded on the evening of August 16, 2024, with a significant closing and signing ceremony at Mangrove Bay, Pohnpei. In "a momentous display of unity and shared vision, President Wesley W. Simina, Governor Stevenson A. Joseph of Pohnpei, Governor Alexander Narruhn of Chuuk, Governor Tulensa Palik of Kosrae, and Governor Charles Chieng of Yap signed the SNLC Joint Communique, a comprehensive Fisheries Policy, and four pivotal resolutions:"

• Resolution on Compact Funding Allocation: Expressing support for increased allocation of Compact funding, through the Annual Implementation Plan (AIP), towards establishing a nationwide program to address critical environmental and climate change-related challenges during the first five (5) years of the Compact Period
• Resolution on Decentralization of Infrastructure Compact Implementation: Expressing support for a bill to amend Title 55 of the FSM Code to decentralize the implementation of infrastructure projects under the Compact.
• Resolution on National Petroleum Corporation and State Utilities: Expressing appreciation for the role of the National Petroleum Corporation and State Utilities while calling for a review and increased transparency in fuel prices and utility tariffs.
• Resolution on Extension of Compact Sector Grants Deadline: Expressing the endorsement by Leaders to seek JEMCO’s approval for an extension of the deadline for the obligation of FY2024 Compact Sector Grants.

Congressional Response

In the fall, the FSM Congress enacted the fishing revenue share. At the same time, claiming it would otherwise lack sufficient revenues to operate, the Congress also increased the share the national government receives from fuel tax as well as taxes from wage and salary, gross receipts and import duties. The FSM President vetoed the legislation but was overridden by the FSM Congress.

State Responses

State Legislatures in both Pohnpei and Yap passed resolutions “decrying and condemning the actions of the Congress of the Federated States of Micronesia in initial passage of and overriding the eventual veto of Public Law No. 23-30.”

On December 28, 2023, the Yap State Legislature adopted Resolution No. 11-44 during its First Regular Session. This resolution expresses full support for Legislature Resolution No. 196-23, which was adopted by the Tenth Pohnpei Legislature. This Pohnpei resolution condemns the actions of the Congress of the Federated States of Micronesia regarding the controversial passage and override of Public Law No. 23-30.

The resolution from Yap’s Legislature stressed the importance of unity within the Federated States of Micronesia and rebukes the Congress for actions perceived as unilateral and against the spirit of unity envisaged in the constitution. It reminds the Congress of the agreement known as the 2023 Arngel Formula, which aimed to promote cooperative governance between the national and state governments. The text emphasizes the importance of such agreements in sustaining national unity.

Further Congressional Action

Through the subsequent Congressional Bill No. 23-33, the FSM Congress acted to to increase the National Government’s share of Compact Funds from zero percent to ten percent and to centralize the infrastructure sector funds of both the National and the four State Governments within the Department of Transportation, Communications, and Infrastructure (TC&I). The distribution of these funds was to be executed according to specified proportions, which have been detailed for various fiscal years. For example, for Fiscal Year 2024 and onwards, the proportions are 38% for Chuuk, 10.89% for Kosrae, 25.31% for Pohnpei, 15.80% for Yap, and 10% for the National Government. Additionally, the National Government was tasked by the Congress with the consolidation of Compact Budget Requests from the States and National Government into a Plan for the Division of Annual Economic Assistance. This act also outlines the role of the FSM Congress in appropriating funds.

The legislation, 23-33, was vetoed by the FSM President but that veto was overridden on September 28, 2023 by the Congress of the FSM.