"President Urusemal to Decide if the FSM Can Afford It"

January 24, 2007

The Kaselehlie Press

Palikir, Pohnpei, FSM-At the Christmas and New Year celebration of the FSM National Government on January 12 Speaker Peter Christian had a grand announcement to make. He told the gathered employees of the National Government that Congress had just passed a raise for all of them and that the bill was on its way to the President's office for his signature

According to some in attendance, President Urusemal's bearing and facial expression gave no sign as to whether or not he would actually sign the bill or even if we was irritated by being put on the spot by Congress. Observers said he sat stoically by, even though he was probably aware that the political ball had been slammed into his court.

According to Congress sources, National Government employees have been lobbying Congress for years for a raise in pay. The pay scale for government employees contained in Section 205 of title 52 of the Code of the FSM has remained the same since 1982. In 1997 a pay freeze went into effect that no longer allowed employees at each pay level to progress through the steps of their level, according to a Department of Personnel and Training official who also said that step four of each pay level is as high as an employee may currently go.

The bill that Congress passed appears on first glance to be a mind numbing series of unrelated numbers. When those numbers are compared with the salary figures of 1982 a spreadsheet shows that each and every employee in every level and step with the exception of those that make $20,000 or more will, under the proposed law receive a $25 bi-weekly increase in pay, what Senators and staffers are calling a COLA (cost of living allowance).

A staff member said on background that Congress had not gathered information on what the cost of the measure would be before they passed it. If each of the 619 employees eligible for the increase under the plan receives an additional $25 biweekly each employee's annual salary will increase by $650 a total of $402,350. Increased Withholding Tax and Social Security Figures would increase that figure further. Mr. Nick Andon, FSM's Secretary of the Department of Finance has since given information to President Urusemal that the impact on the budget would be in the range of $380,000 to $400,000.

An analysis of the percentage level of increases shows that an employee at the lowest level and step would receive a 24.80% increase while an employee at the highest level and step would receive a 3.39% increase which would be naturally inherent with a specific dollar amount increase as opposed to a percentage level increase.In the Fifth Regular Session of this Congress, members overrode Urusemal's veto of what became Public Law 14- 90 providing for payroll and payroll tax deductions from GRT (Gross Revenue Tax). Mr. Andon said that the impact on FSM Government revenue from the revised GRT would be $1.7 Million dollars in lost revenue, a figure conservatively adjusted downward from the initial assessment of a $5 Million loss.

A recent bill CB-243 introduced by Senator Simiram Sipenuk seeks to suspend the application of the newly passed law on GRT deductions. The new forms are already on the shelves at the Revenue offices. It is unclear whether passage of this bill, which has not yet passed from Senator Isaac Figir's Ways and Means Committee to the Congress floor would mean a reversion to the former system or not.

The wording on the bill seems to suggest that the GRT Deductions would be allowed for the 2006 tax year as planned and then be suspended for three quarters of the 2007 tax year.