Analysis
Chuuk Is Broke
Neglect And Incompetence Have Bankrupted Chuuk State
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Chuuk State in the Federal States of Micronesia is bankrupt. It is strapped with a deficit of about $35 million. Of this amount, $10 million is the actual government deficit; $15 million is owed to landowners for land leases and another $10 million is payment for adjudicated claims against the state. This deficit started in the early 1980s when the state legislature approved a cost of living allowance for its employees, but the former Trust Territory of the Pacific Islands refused to fund it.
Chuuk began the Compact era with a deficit smaller than $35 million. Although it received an average grant of about $27 million per year for 15 years, Chuuk failed to resolve its financial problems. The state constitutional mandate that 40 percent of the Compact grant must be allocated among the municipalities contributed greatly to Chuuk’s financial troubles. It was bad public policy to share revenue with the municipalities because they provide no public services, other than public safety. It may be a popular political scheme, but it left the state woefully short of the funds needed to build new roads, repair the airport and maintain public facilities. About three years ago, the state was forced to borrow money from the municipalities to repair the airport and install a new security fence. Now the municipalities are demanding reimbursement.
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The two field trip ships are tied up for want of repair and lack of money for operations. Because of this, the residents of the outer islands are forced to make round trips to the state center on Weno in the lagoon in open outboard motorboats. In some instances, they cover a distance of more than 100 miles one way.
Another contributing factor to this seemingly unending financial quagmire is the payments for various plots of land the state government leased for public facilities. Unlike the other three FSM states that have kept the land which the Trust Territory returned in 1977, Chuuk returned the lands to the former owners, and then negotiated new leases. Legally, the former landowners no longer own the lands so returning the land to them was a gratuitous political gesture. It was good politics to return the land, but it was another terrible public policy decision. Now payments of land leases have become a major drain on the state’s empty treasury.
In many of the court cases filed against Chuuk, the judgments were entered default because of no show on the part of government. It is simply a case of neglect and dereliction of duty on the part of the state attorney general and the governor.
Chuuk government did not make any attempt to resolve its burgeoning deficit when the Compact money became available in 1986. Instead the number of state employees increased; the government continued to spend its funds on trivial projects. The members of the legislature voted themselves a pay raise and continued to dole out public money to their constituents for so-called community centers, which are then converted into supporters’ family dwellings. Other popular projects are seawalls. Most of them are just piles of rock about 10 feet long. The money is distributed to friends and political supporters who are selected to work on the projects. These seawalls provide good cover for doling out public money.
As in the other FSM states, Chuuk introduced public sector reforms in 1995 in anticipation of the second step-down in Compact grants. As a result, the state reduced its employees from 3,000 to about 2,000. This brought hope that Chuuk would finally get its financial troubles under control. But for some reason, perhaps for political expediency, Chuuk discarded the reform and began to hire more employees. Now pessimism has returned and Chuuk’s financial woes continue to multiply.
Chuuk’s financial trouble is self-inflicted. It is caused by bad policy decisions and aggravated by the lack of leadership and the political will to make drastic reforms. Chuuk needs to resolve its financial problem right away because Compact II will not bail it out.
The author is a professor at the College of Micronesia, and is a former president of the Federated States of Micronesia.
