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Senate hearing highlights issues about LBJ funding

Fono legal counsel Henry Kappel was called Thursday by the Senate Budget and Appropriations Committee to provide information on the funding source for a $2 million supplemental appropriation to assist the hospital. The hearing highlighted two major issues about the funding source.

The measure, introduced last week Friday by Senate President Gaoteote Tofau Palaie, has as the funding source, the money held in the escrow account for ASG from the national Tobacco Master Settlement Agreement.

(An identical bill was introduced Tuesday this week in the House, sponsored by House Speaker Savali Talavou Ale.)

“Given the source of these payments — which are the tobacco manufacturers — and that the intent of the MSA includes addressing the harms of tobacco use, it is fitting that these payments be appropriated to support the operations of LBJ to improve the level of health care in the territory,” the bill states.


During the Senate committee hearing Kappel gave a brief explanation on how the MSA was reached between major tobacco companies with other states and territories and that American Samoa’s share was used as a security for an $18.6 million loan ASG received from the federal government. The loan which was made around year 2000, was used by ASG to pass off previous debts and fund fiscal reforms.  It is overseen by the U.S. Department of Interior.

ASG granted to DOI an assignment of its interests in certain payments to which it was entitled under the MSA, especially payments made pursuant to two provisions of the MSA, according to the bill.

However, ASG did not assign or pledge its interest in payments to which it is entitled under a third provision of the MSA.

The said payments from the MSA escrow account were to commence on Apr. 15, 2008 and are to continue through Apr. 15, 2017, according to the bill.

The bill also states that the said payments are not reflected in ASG’s projected revenues.

During the hearing, Kappel told senators that after reviewing the FY 2012 budget proposal, nothing is mentioned that the money in the escrow account is included in projected revenues. However, he said that in ASG financial statements for FY 2010, this escrow account has a balance of $2.1 million.

He also pointed out that maybe this issue can be taken up later with ASG officials for a full explanation on why it’s not included in projected revenues for the current fiscal year.


Kappel further said that the local law authorizing the government to enter into a loan agreement requires the governor or his designee to provide an annual report to the Fono on the repayment of the loan, status of the fiscal reform plan and other matters, but he has not seen such a report.

He suggested that maybe the Senate could request the executive branch to provide the latest updated report. Kappel also provided for the committee various documents pertaining to the loan agreement.

At the end of the hearing, the committee opted to discuss further this measure before making a final decision.

Meanwhile, the Senate passed yesterday during third and final reading a separate Senate bill which also provides financial assistance for the hospital. The bill imposes a new 2% wage tax on all wage earners in the territory and becomes effective in tax year 2012.

The measure now goes to the House where an identical bill was introduced Wednesday by Vice Speaker Talia Fa’afetai Iaulualo and Reps. Simei Pulu and Toeaina F. Autele.