Faleomavaega (AS00) - Washington, D.C. —Faleomavaega responds to Fono's request for report on ASPIRE, minimum wage, health care and Essential Air Service (EAS) for Manu'a

Congressman Faleomavaega announced today that in a letter dated March 11, 2010 he has responded to Senate President Gaoteote Palaie Tofau and Speaker Talavou Ale’s request for a report on ASPIRE, minimum wage, health care and essential air service (EAS) for Manu’a. Faleomavaega copied his letter to the Senators and Representatives, and the letter and enclosures were distributed to every member of the Fono. The full text of Faleomavaega’s letter is included below:,

I am writing in response to your letter received on February 4 in which you requested me to appear before the Legislature to provide a report on Federal-Territorial issues. Given that the U.S. House of Representatives was in session on February 24, 2010 on the date you tentatively set for me to testify, I am submitting a written report which I hope will be useful to you.

In response to your question about the status of the ASPIRE bill, efforts are still ongoing to provide a funding source to help level the playing field for StarKist which is the only U.S. tuna company which continues to process whole fish in America. As you know, Bumble Bee and Chicken of the Sea now purchase frozen tuna loins that have already been cleaned in low-wage rate countries like Thailand which pay their workers $0.75 cents and less per hour. Prior to its departure from American Samoa and prior to any increase in minimum wage, Chicken of the Sea was already operating in 2006 at about a $7.5 million loss per year. StarKist was operating at the same loss because neither StarKist nor Chicken of the Sea/Samoa Packing could compete against Thailand’s low-wage rates and tax incentives. While Chicken of the Sea/Samoa Packing chose to leave American Samoa without the courtesy of discussing its departure with the Fono, Governor, or myself, StarKist has reached out to the Governor and my office for assistance at the local and federal levels.

Although I cannot speak to what efforts the Fono or Governor have undertaken at the local level to encourage StarKist to stay, I have worked closely with StarKist at the federal level to put in place short-term and long-term solutions, and these efforts are still ongoing. Together, we put forward the proposed ASPIRE bill and are seeking to convert 30A tax credits. Furthermore, I requested a one-time $25 million emergency appropriation from Congress for purposes of providing StarKist with the immediate help it needs and, since 2009, I have had on-going discussions with the U.S. Department of Treasury about developing a more permanent funding stream to rebuild our tuna industry and encourage broad economic development. At my request, the White House and the U.S. Department of the Interior are engaged in these discussions.

Whether or not these efforts will be successful remains to be seen since the U.S. economy is seriously in recession and given that Congress has already provided hundreds of millions of dollars in tax breaks to our tuna industry every year for the past 20-years which could have and should have helped our canneries prepare for a rainy day. Moreover, Bumble Bee and Chicken of the Sea have enlisted their Democratic Members of Congress who represent California, Georgia and Puerto Rico to oppose ASPIRE and any modifications to it. Because these Democratic Members of Congress also want to protect the jobs of their workers, they are standing with Bumble Bee and Chicken of the Sea while we are standing with StarKist. While the Obama Administration has indicated conditional support for ASPIRE if we can work out a compromise, StarKist may not have the time it needs to wait for the outcome.

As you know, the U.S. tuna industry has undergone a complete transformation in the past ten years shifting from a whole fish model to a frozen loin model and StarKist cannot continue to incur losses as it competes against Bumble Bee and Chicken of the Sea which have decided to purchase tuna loins from low wage-rate countries rather than employ workers in America to clean whole fish. Without a doubt, I am disappointed that Chicken of the Sea/Samoa Packing chose to outsource our jobs to Thailand and I am also disappointed that Chicken of the Sea chose not to downsize in American Samoa. However, it is my understanding that one of the reasons Chicken of the Sea chose not to downsize in American Samoa is because the State of Georgia offered Chicken of the Sea a better local tax incentives package.

Regardless of what decision StarKist will need to make in the very near future, I will continue to do everything I can at the federal level to create an environment where American Samoa can be the hub of the U.S. tuna industry once again, although this may take time. In the interim, I am hopeful that ASG will continue to do all it can to diversify its economy and put in place the recommendations of the American Samoa Economic Advisory Commission which released its report since 2002, well before the tuna industry was under the threat it is today and long before minimum wage hikes.

About minimum wage, for the past 50-years American Samoa was given a free pass in having our wages kept low for the sake of our tuna canneries. But when minimum wage was raised all across America in 2006, Congress determined that it was time to raise minimum wage in American Samoa and CNMI which were the only two remaining U.S. Territories which were not up to federal minimum wage standards. While I was supportive of a one-time increase of $0.50 cents per hour, I did not support further increases because there was never any report that provided an accurate accounting of the economy of the Territory.

By direction of the U.S. Congress, the GAO was directed to conduct a study and provide a report on the impact of federal minimum wages increases in American Samoa and CNMI. The report will be released next month and the advance copy shows that American Samoa’s economy is at the tipping point. But, the report makes no recommendations about what should or could be done given that every worker in America is entitled to fair wages and an income that keeps up with the cost of living.

While you are right that minimum wage is a factor for our tuna industry, the primary factor is not our wage rates but the wage rates of foreign countries. As the GAO report will show, in 2006 our canneries were already operating at about a $7.5 million loss per year before minimum wage went into effect because the tuna industry itself has dramatically changed with Chicken of the Sea and Bumble Bee adopting a business model of outsourcing tuna preparation to cheap foreign labor and then bringing the almost finished product into small U.S. operations for final packaging. A cannery like StarKist that cleans whole fish in American Samoa simply cannot compete against canneries that buy loins from low-wage rate countries like Thailand that pay their fish cleaners $0.75 cents and less per hour.

These factors coupled with the tremendous shift in the way that tuna companies are now operating by outsourcing jobs to Thailand suggest that ASG should do all it can to implement the recommendations of the American Samoa Economic Advisory Commission.

For now, I am pleased to report that on February 17, 2009 Congress passed the American Recovery and Reinvestment Act which included the Congressional Delegates’ initiative to make sure that the Territories would receive assistance from this bill to stabilize their economies. As a result of federal funds provided by the American Recovery and Reinvestment Act, the American Samoa Telecommunications Agency (ASTCA) was able to put forward a competitive grant application and was just awarded over $80 million from the federal government for a fiber optics network making it possible “to provide broadband services to every household, business and critical institution in the region” which will lead to increased educational and economic opportunities. ASTCA will also receive an additional $10 million loan and will use about $4.4 million in private funds for the project.

In May of 2009, I also met with U.S. Department of Labor (DOL) officials regarding national emergency grants (NEGS) in response to Chicken of the Sea’s announced closure. I then forwarded this information to Governor Togiola in a letter dated May 7, 2009, providing the Governor with the contact information necessary to request national emergency grants and informing the Governor and the public that any request put forward must originate with the Governor. I am enclosing this letter for you.

Since this time, DOL and ASG have been working together on national emergency grants that could be helpful to our people. While the national emergency grant for our displaced cannery workers at Samoa Packing has not yet been finalized between ASG and the DOL, the DOL informed my office that its regional office in San Francisco preemptively and immediately reached out to ASG when the tsunami struck and informed the Governor’s office that ASG could also apply for a disaster national emergency grant.

The DOL then assisted ASG in preparing and processing a disaster national emergency grant application and, on October 20, 2009, DOL awarded American Samoa over $24 million to assist with clean-up and recovery following the tsunami that struck our islands on September 29, 2009. In a recent meeting held in my office last week, DOL informed me that about $8 million has already been released to ASG and that about $5 million has been expended so far. These funds are being used to create temporary jobs to assist in the recovery efforts, and discussions are ongoing about how this grant might be expanded to more fully include our cannery workers.

Regarding your question about Essential Air Services for Manu’a, I am enclosing copies of all official correspondence regarding this matter which included letters I previously sent to you, the Fono, District Governor Misaalefua, Chairman Avegalio Aigamaua of the Senate Committee on Transportation, Chairman Vaito’a Langkilde of the House Committee on Transportation, and the U.S. Department of Transportation. As you will note, I explained the process of submitting a bid and also informed our local government officials that the USDOT needs further information including: 1) number of flights preferred by the Manu’a Islands; 2) number of weekly flights that Interisland is expected to provide the Manu’a Islands; 3) expected routes and the number of stops; 4) estimated number of patrons per flight; 5) aircraft type; and 6) total estimated cost for providing services to Manu’a, To date, I have not heard back from any of our local officials and, to my knowledge, neither has the U.S. Department of Transportation. Therefore, EAS Service for Manu’a is on hold until such time as our local government officials and Inter-Island Airways provide the USDOT with the information it needs.

In early 2003, the U.S. Department of Health and Human Services (DHHS) awarded ASG $1.2 million, including a grant of $868,841, to commission a Task Force to make recommendations about how American Samoa could develop a financially viable health plan for our Territory. The award was received under the State Planning Grant and, from September 2004 to August 2007, the Task Force worked on this project and, on September 29, 2007, the Task Force issued its Coverage for All in American Samoa (CAAS) report.

As you may be aware, ASG did not share a copy of the CAAS report with my office. However, on June 22, 2009, I wrote to you and requested your review of American Samoa’s health care system in light of current developments in the U.S. Congress and in reference to the CAAS report. Although I copied my letters to every member of the Fono, I did not receive a reply from the Fono or your offices but, for your information, I am enclosing the letters again.

As I noted in my letters of June 22, 2009, the 2007 CAAS report disclosed several findings critical to the assessment of the existing health care system in American Samoa. The report drew frominformation providedby AcademyHealth, one of the nation’s leading health policy resource centers in research analysis, facilitation, education and training, strategic planning, and program management. Moreover, the report drew from the experience of developing countries in Sub-Saharan Africa, Latin America, and Asia relating to user fees and self-insurance as health care financing tools.

3. Allow Health Savings Account by Law – the report recommends that legislation be enacted for the establishment of Health Savings account (HAS) as proposed in Part 5 of the report, in conjunction with High deductible Catastrophic Health Plans in American Samoa.

4. Establish/Encourage Use of Tax Incentive Programs – eligible employers be encouraged to establish Section 125 Plans that include health coverage plans for their employees as discussed in Part 5 of the report. Consider other tax incentives (deductions or credits) associated with health care plans.

Based on these recommendations and after discussions with some of our local leaders, LBJ officials and other health care professionals, I respectfully suggested that the Fono should thoroughly review the recommendations in the CAAS report and hold hearings about how to reform the health care system in American Samoa. For purposes of a hearing, I suggested that you might want to reach out to our local experts and to those with the experience and understanding of health care issues in our Territory.

I also mentioned that in my meetings with Ms. Patricia Tindall, who was at the time Executive Director of LBJ, she indicated that our whole health care system is “fragmented” and I totally agree with her assessment. As suggested in the CAAS report, the problem is threefold. First, the user fees charged by the American Samoa Medical Center Authority (ASMCA) are no longer affordable. Second, the quality of services at LBJ is perceived by many to be substandard. Three, certain needed specialized services are not available locally.

Regarding the status of health care legislation in the 111^th Congress, the Congressional Delegates have worked jointly together to make sure that the needs of the Territories are addressed in any comprehensive healthcare reform legislation which may be put forward. We were able to secure private meetings with Chairman Henry Waxman of the House Committee on Energy and Commerce, and Chairman Charles Rangel of the House Committee on Ways and Means. At these meetings, we presented our case for the inclusion of the Territories in the House Health Care Reform legislation, and Chairman Rangel and Chairman Waxman pledged their support to work with us to bring the Territories to parity with the States.

In follow-up discussions, we further refined certain provisions and, on November 7, 2009, the House passed the historic Health Care Reform legislation by a vote of 220 to 215. If signed into law, American Samoa would receive the following:

ASG will receive an increase of $239.5 million over the next 9 years for Medicaid. The following chart shows an approximation of what ASG would receive on a yearly basis. Please note that the amounts will be even higher when adjusted for inflation.

The Federal Matching Assistance Percentage (FMAP) is used to determine the Federal government’s share in providing for certain medical services provided by a State or Territory. Currently, the FMAP for all Territories is set by statute at 50%. If H.R. 3962 is signed into law, the federal government match for Medicaid would increase from 50% to 75% meaning that the federal government would be required to pay a greater portion of our costs.

In our discussions with the House, we asked for the Territories to be allowed the option to participate in the Health Care Exchange. The Exchange would not be an insurer but it would provide eligible individuals and small businesses with access to insurers’ plans in a comparable way. The Exchange would consist of a selection of private plans in which individuals choosing not to purchase health insurance through an employer or a grandfathered non-group plan could obtain such coverage through the Exchange.

If ASG chooses to participate, ASG can receive about $75 million to run the Exchange and would be treated as State with according privileges and responsibilities. This amount would help provide cover over for credit used by individuals to purchase health insurance through the Exchange program. If ASG chooses not to participate, ASG can use this $75 million to supplement its Medicaid funding. Under the Health Exchange provision, the total funding for the Territories is $4 billion. Based on population, Puerto Rico will receive the largest allocation of $3.7 billion while $300 million is divided among USVI, Guam, CNMI and American Samoa.

In addition to the above benefits, no later than October 1, 2013, the Secretary of the Department of Human and Health Services (HHS) will work closely with each Territory to submit to Congress a report that details a plan for the transition of each Territory to full parity in Medicaid with the 50 States and the District of Columbia in fiscal year 2020 by modifying their existing Medicaid programs and outlining actions the Secretary and governments of each Territory must take by fiscal year 2020 to ensure parity in financing.

On January 14, 2010, the Congressional Delegates wrote a letter to Speaker Pelosi asking that House-passed language be inserted in the final Health Care Reform legislation. At this point, there is no clear indication from the Democratic Leadership on how to reconcile the differences between the House and Senate health care bills, especially in light of the current political environment

Current discussion suggests that the Health Care Reform bill will be put through the reconciliation process, which will only require a simple majority in the Senate for passage. If this is the case, the House will have to pass the Senate bill as it is. For the Territories, we have a commitment from the House leadership and Senator Dodd that they will put back our provisions in the final bill. But the reconciliation process only applies to “mandatory spending” and “federal tax revenues,” not programmatic language, which means that we do not know for sure what we can and cannot add to the Territorial provisions.