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February 2014 Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas Final Report Prepared for Office of Insular Affairs U.S. Department of the Interior 1849 C Street, NW Washington, DC 20240 Prepared by Travis J. Beaulieu Sara E. Casey Alan C. O’Connor RTI International 3040 E. Cornwallis Road Research Triangle Park, NC 27709 RTI Project Number 0214216 _________________________________ RTI International is a trade name of Research Triangle Institute. RTI Project Number 0214216 Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas Final Report February 2014 Prepared for Office of Insular Affairs U.S. Department of the Interior 1849 C Street, NW Washington, DC 20240 Prepared by Travis J. Beaulieu Sara E. Casey Alan C. O’Connor RTI International 3040 E. Cornwallis Road Research Triangle Park, NC 27709 iii Contents Section Page Executive Summary ES-1 1. Introduction 1-1 1.1 FY 2013 OIA Payments to Insular Areas ...................................................... 1-2 1.2 Study Objectives ...................................................................................... 1-3 1.3 Overview of Study Methodology ................................................................. 1-3 1.4 Methodological Limitations ........................................................................ 1-6 1.5 Data Limitations ....................................................................................... 1-7 1.6 Report Organization .................................................................................. 1-8 2. American Samoa 2-1 2.1 FY 2013 OIA Payments Summary ............................................................... 2-1 2.2 Economic Impacts of OIA Payments Using Economic Base Analysis ................. 2-3 2.2.1 Direct Economic Impacts ................................................................. 2-3 2.2.2 Employment and Employee Compensation Base Multipliers .................. 2-4 2.2.3 GDP Base Multipliers ....................................................................... 2-6 2.2.4 EBA Economic Impact Estimate ........................................................ 2-8 2.3 Economic Impacts of OIA Payments Using Input-Output Analysis ................... 2-8 3. Guam 3-1 3.1 FY 2013 OIA Payments Summary ............................................................... 3-1 3.2 Economic Impacts of OIA Payments Using Economic Base Analysis ................. 3-3 3.2.1 Direct Economic Impacts ................................................................. 3-3 3.2.2 Employment and Employee Compensation Base Multipliers .................. 3-4 3.2.3 GDP Base Multipliers ....................................................................... 3-6 3.2.4 EBA Economic Impact Estimate ........................................................ 3-7 3.3 Economic Impacts of OIA Payments Using Input-Output Analysis ................... 3-8 4. Commonwealth of the Northern Mariana Islands (CNMI) 4-1 4.1 FY 2013 OIA Payments Summary ............................................................... 4-1 4.2 Economic Impacts of OIA Payments Using Economic Base Analysis ................. 4-1 4.2.1 Direct Economic Impacts ................................................................. 4-1 iv 4.2.2 Employment and Employee Compensation Base Multipliers .................. 4-4 4.2.3 GDP Base Multipliers ....................................................................... 4-6 4.2.4 EBA Economic Impact Estimate ........................................................ 4-8 4.3 Economic Impacts of OIA Payments Using Input-Output Analysis ................... 4-8 5. U.S. Virgin Islands (USVI) 5-1 5.1 FY 2013 OIA Payments Summary ............................................................... 5-1 5.2 Economic Impacts of OIA Payments Using Economic Base Analysis ................. 5-1 5.2.1 Direct Economic Impacts ................................................................. 5-2 5.2.2 Employment and Employee Compensation Base Multipliers .................. 5-3 5.2.3 GDP Base Multipliers ....................................................................... 5-5 5.2.4 EBA Economic Impact Estimate ........................................................ 5-7 5.3 Economic Impacts of OIA Payments Using Input-Output Analysis ................... 5-7 6. Federated States of Micronesia (FSM) 6-1 6.1 FY 2013 OIA Payments Summary ............................................................... 6-1 6.2 Direct Economic Impacts ........................................................................... 6-2 6.3 Employment and Employee Compensation Base Multipliers ............................ 6-4 6.4 GDP Base Multipliers ................................................................................. 6-4 6.5 EBA Economic Impact Estimate .................................................................. 6-7 7. Republic of the Marshall Islands (RMI) 7-1 7.1 FY 2013 OIA Payments Summary ............................................................... 7-1 7.2 Economic Impacts of OIA Payments Using Economic Base Analysis ................. 7-2 7.3 GDP Base Multipliers ................................................................................. 7-6 7.4 EBA Economic Impact Estimate .................................................................. 7-6 8. Republic of Palau 8-1 8.1 FY 2013 OIA Payments Summary ............................................................... 8-1 8.2 Direct Economic Impacts of Payments......................................................... 8-2 8.3 Employment and Employee Compensation Base Multipliers ............................ 8-3 8.4 GDP Base Multipliers ................................................................................. 8-5 8.5 EBA Economic Impact Estimate .................................................................. 8-6 9. District of Columbia and Hawaii 9-1 9.1 Economic Impact Assessment of OIA Operations in District of Columbia .......... 9-1 v 9.2 Economic Impact Assessment of OIA Operations in Hawaii ............................ 9-2 10. Comparison of Economic Base Analysis and Input-Output Analysis Results 10-1 11. Analysis Summary 11-1 References R-1 Appendix A: Allocation of FY 2013 Technical Assistance and Other Payments by Insular Area A-1 vi Tables Number Page ES-1. Economic Impact Summary of OIA Grants and Payments (FY 2013) .................. ES-2 ES-2. Economic Characteristics by Insular Area ........................................................ ES-3 ES-3. FY 2013 OIA Payments by Insular Area .......................................................... ES-4 ES-4. Estimated Employment Impact of OIA Payments (FY 2013) .............................. ES-5 ES-5. Estimated Employee Compensation Impact of OIA Payments (FY 2013) ............ ES-6 ES-6. Estimated GDP Impact of OIA Payments (FY 2013) .......................................... ES-7 1-1. Economic Characteristics by Insular Area .......................................................... 1-1 1-2. FY 2013 OIA Payments by Insular Area ............................................................ 1-3 2-1. American Samoa: OIA Payments (FY 2013) ...................................................... 2-2 2-2. American Samoa: Estimated Direct Economic Impacts Using EBA (FY 2013) ......... 2-4 2-3. American Samoa: Employment and Employee Compensation by Industry (2011 estimates) ........................................................................................... 2-5 2-4. American Samoa: GDP by Industry (2011) ....................................................... 2-7 2-5. American Samoa: Total Estimated Economic Impact Using EBA (FY 2013) ............ 2-8 2-6. American Samoa: Direct Economic Impacts of OIA Payments Using I/O Analysis (FY 2013) ......................................................................................... 2-9 2-7. American Samoa: Selected IMPLAN Multipliers by Industry ................................. 2-9 2-8. American Samoa: Total Economic Impacts Using I/O Analysis (FY 2013) ............ 2-10 2-9. American Samoa: Estimated Impact Relative to National Economy (FY2013) ...... 2-10 3-1. Guam: OIA Payments (FY 2013) ...................................................................... 3-2 3-2. Guam: Estimated Direct Economic Impacts Using EBA (FY 2013) ......................... 3-4 3-3. Guam: Estimated Employment and Employee Compensation by Industry (2013) ......................................................................................................... 3-5 3-4. Guam: GDP by Industry (2011) ....................................................................... 3-7 3-5. Guam: Total Estimated Economic Impact Using EBA (FY 2013) ........................... 3-8 3-6. Guam: Direct Economic Impacts of OIA Payments Using I/O Analysis (FY 2013) .......................................................................................................... 3-8 3-7. Guam: Selected IMPLAN Multipliers by Industry ................................................ 3-9 3-8. Guam: Total Economic Impacts Using I/O Analysis (FY 2013) ............................. 3-9 3-9. Guam: Estimated Impact Relative to National Economy (FY 2013) ..................... 3-10 4-1. CNMI: OIA Payments (FY 2013) ...................................................................... 4-2 4-2. CNMI: Estimated Direct Economic Impacts Using EBA (FY 2013) ......................... 4-4 4-3. CNMI: Estimated Employment and Employee Compensation by Industry (2011 estimates) .................................................................................................... 4-5 4-4. CNMI: GDP by Industry (2011) ....................................................................... 4-7 4-5. CNMI: Total Estimated Economic Impact Using EBA (FY 2013) ............................ 4-8 vii 4-6. CNMI: Direct Economic Impacts of OIA Payments Using I/O Analysis (FY 2013) .......................................................................................................... 4-9 4-7. CNMI: Selected IMPLAN Multipliers by Industry ................................................. 4-9 4-8. CNMI: Total Economic Impacts Using I/O Analysis (FY 2013) ............................ 4-10 4-9. CNMI: Estimated Impact Relative to National Economy (FY2013) ...................... 4-10 5-1. USVI: OIA Payments (FY 2013) ....................................................................... 5-2 5-2. USVI: Estimated Direct Economic Impacts Using EBA (FY 2013) .......................... 5-3 5-3. USVI: Employment and Employee Compensation by Industry (2011 estimates) .................................................................................................... 5-4 5-4. USVI: GDP by Industry (2011) ........................................................................ 5-6 5-5. USVI: Total Estimated Economic Impact Using EBA (FY 2013) ............................. 5-7 5-6. USVI: Direct Economic Impacts of OIA Payments Using I/O Analysis (FY 2013) ..... 5-8 5-7. USVI: Selected IMPLAN Multipliers by Industry .................................................. 5-8 5-8. USVI: Total Economic Impacts Using I/O Analysis (FY 2013) ............................... 5-9 5-9. USVI: Estimated Impact Relative to National Economy (FY 2013) ........................ 5-9 6-1. FSM: OIA Payments (FY 2013) ........................................................................ 6-1 6-2. FSM: Estimated Direct Economic Impacts Using EBA (FY 2013) ........................... 6-3 6-3. FSM: Employment and Employee Compensation by Industry (2012 estimates) ..... 6-5 6-4. FSM: GDP by Industry (2012) ......................................................................... 6-6 6-5. FSM: Total Estimated Economic Impact Using EBA (FY 2013) .............................. 6-7 6-6. FSM: Estimated Impact Relative to National Economy Using EBA (FY2013) ........... 6-8 7-1. RMI: OIA Payments (FY 2013) ........................................................................ 7-1 7-2. RMI: Estimated Direct Economic Impacts Using EBA (FY 2013) ........................... 7-4 7-3. RMI: Employment and Employee Compensation by Industry (2012 estimates) ...... 7-4 7-4. RMI: Total Estimated Economic Impact Using EBA (FY 2013) .............................. 7-7 7-5. RMI: Estimated Impacts Relative to National Economy Using EBA (FY2013) .......... 7-7 8-1. Palau: Grant Spending by Appropriation (FY 2013) ............................................ 8-1 8-2. Palau: Estimated Direct Economic Impacts (FY 2013)......................................... 8-3 8-3. Palau: Estimated Employment and Employee Compensation by Industry (2012) ......................................................................................................... 8-4 8-4. Palau: GDP by Industry (2013) ....................................................................... 8-6 8-5. Palau: Total Estimated Economic Impact Using EBA (FY 2013) ............................ 8-7 8-6. Palau: Estimated Impacts Relative to National Economy Using EBA (FY 2013) ....... 8-7 9-1. Economic Impact Assessment of OIA Operations in District of Columbia (FY 2013) .......................................................................................................... 9-2 9-2. 2013 OIA Operations in Hawaii and Corresponding IMPLAN Codes ....................... 9-2 9-3. Direct Economic Impacts of OIA Operations in Hawaii (FY 2013) ......................... 9-3 9-4. Selected Multipliers by Industry, Hawaii ........................................................... 9-3 9-5. Total Economic Impacts of OIA Payments, Hawaii .............................................. 9-4 10-1. Comparison of EBA and IMPLAN Total Impacts by Insular Area .......................... 10-1 11-1. Estimated Employment Impact of OIA Payments (FY 2013) .............................. 11-1 viii 11-2. Estimated Employee Compensation Impact of OIA Payments (FY 2013) ............. 11-1 11-3. Estimated GDP Impact of OIA Payments (FY 2013) .......................................... 11-2 A-1. Estimation of FY 2013 General Technical Assistance by Area ............................... A-2 A-2. Estimation for FY 2013 Payments by Insular Area Using FY 2012 Actuals .............. A-3 ES-1 EXECUTIVE SUMMARY The Office of Insular Affairs (OIA) carries out the Department of the Interior’s responsibilities for U.S.-affiliated insular areas. These areas are the territories of American Samoa, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands as well as the Freely Associated States (FAS)1 of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau. The total budget of the OIA for fiscal year (FY) 2013 was $648 million, of which $619 million was direct grants and payments to the insular areas. This assistance played an important role in the economies of each of these areas by providing financial and technical assistance to promote economic growth, education, and public health and the development of more efficient and effective government. Generally, a lack of sophisticated economic data series for these insular areas deprived territorial and federal leaders of the type of thorough economic analysis that would help them make more informed policy decisions. For the FY 2013 analysis, input-output data from the Bureau of Economic Analysis (BEA) are newly available for U.S. territories via economic impact modeling tools. For FAS, RTI International used the economic base analysis approach employed in previous years’ studies. The following economic aggregates were calculated for each insular area:
Employment: the number of individuals gainfully employed, which typically consists of full-time and part-time employees but excludes subsistence agriculture and fishing
Employee compensation: payments made to all employees during the year, including salaries, wages, and other forms of compensation
Gross domestic product (GDP): a measure of each area’s economic output—typically defined as the value of all final goods and services made within the borders of the insular area in a particular year Table ES-1 summarizes the results of this analysis. 1 FAS are independent nations that were at one time governed by the United States and continue to maintain a close relationship with the United States through the Compact of Free Association, which makes them eligible to receive funds and assistance from U.S. federal agencies. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas ES-2 Table ES-1. Economic Impact Summary of OIA Grants and Payments (FY 2013) Total OIA Payments ($’000, 2013$) Total OIA Employment Impact National Employment Supported by OIA Payments (%) Total OIA Employee Compensation Impact ($’000, 2013$) National Employee Compensation Supported by OIA Payments (%) Total OIA GDP Impact ($’000, 2013$) National GDP Supported by OIA Payments (%) American Samoa 35,316 1,237 9% 29,134 17% 44,822 7% Guam 106,787 4,085 15% 108,042 12% 132,955 3% Northern Mariana Islands 14,888 787 4% 14,397 3% 22,303 3% U.S. Virgin Islands 268,570 8,012 21% 286,503 23% 412,350 9% Micronesia 108,584 7,880 52% 56,279 81% 185,986 56% Marshall Islands 70,926 3,598 34% 35,971 35% 77,819 44% Palau 14,166 742 8% 7,782 9% 32,821 14% Total 619,238 26,341 19% 538,107 18% 909,056 8% Note: Total impacts are the sum of estimated direct, indirect, and induced impacts associated with OIA grants and payments. Approximately $28.9 million of a total $648 million was spent outside the seven insular areas that were the primary focus of this study. Source: RTI estimates. ES.1 FY 2013 OIA Payments to the Insular Areas OIA’s responsibilities are framed by the long-term security interests of the United States in the western Pacific and serious economic and fiscal problems affecting the U.S. territories and FAS. Although each insular areas situation is unique, they share common challenges, including limited land and resources; small populations; limited local technical expertise; narrow economic bases; and exposure to natural disasters, such as hurricanes and typhoons. OIA strives to empower the local communities, foster economic development, promote sound management, and improve quality of life while respecting and preserving local cultures. U.S. per capita GDP was estimated to be approximately $51,749 in 2012, presented in 2013 dollars (World Bank, 2013a). By contrast, per capita GDP for the insular areas averages to less than $20,000, although there is great variability in income across areas (Table ES-2). Executive Summary ES-3 Table ES-2. Economic Characteristics by Insular Area Estimated Population (# in 2012) Estimated Employment (#) Estimated Employee Compensation ($’000, 2013$) GDP ($’000, 2013$) GDP per Capita (2013$) American Samoa 55,130 13,692 173,184 671,098 12,173 Guam 162,800 26,700 916,253 4,717,364 28,976 Northern Mariana Islands 53,310 21,399 464,919 674,205 12,647 U.S. Virgin Islands 105,300 38,454 1,221,177 4,511,271 42,842 Micronesia 102,843 15,281 69,431 330,938 3,218 Marshall Islands 53,158 10,618 102,208 174,985 3,292 Palau 17,455 8,944 90,516 231,761 13,278 United States 313,873,685 51,749 Sources: 2012 population estimates were obtained from the World Bank (2013b). Data on estimated 2013 GDP and GDP per capita for the four U.S. territories were collected from the Bureau of Economic Analysis (BEA) (2013) and are presented in 2013 terms. Data on estimated employment and employee compensation for the four U.S. territories are RTI estimates based on IMPLAN (2013). Data on estimated 2012 population, 2013 GDP, and GDP per capita for the three FAS were obtained from Pacific & Virgin Islands Training Initiatives (PITI-VITI) (2013a, 2013b, 2013c). 2013 GDP per capita for the United States was from the World Bank (2013a, 2013b). RTI constructed estimated employment and employee compensation statistics for the three FAS based on data obtained from PITI-VITI (2013a, 2013b, 2013c). The construction of this data for each insular area is explained in more detail in the full report. For FY 2013, $619 million of OIA’s $648 million budget was distributed directly to insular areas for technical assistance, grants, and payments to the insular areas, of which a large majority is considered mandatory, essential assistance to provide basic services or defined by law, while only a small percentage is considered discretionary (OIA, 2013b). OIA payments fund health care, education, government operations, roads, and other types of social and physical infrastructure. From a budgetary standpoint, payments can be separated into three primary categories (Table ES-3):
Fiscal payments, which are the return of taxes collected by the U.S. federal government to Guam and the U.S. Virgin Islands, as required by law
Assistance to Territories, which provides general technical assistance; finances education and health care operations; funds and maintains essential infrastructure; and supports environmental initiatives, including brown tree snake control and the Coral Reef Initiative
Compact of Free Association, which distributes annual payments to FAS, per their treaties with the United States, and provides support to the U.S. western Pacific territories and Hawaii to offset the impact the Compact has on regional social infrastructure Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas ES-4 Table ES-3. FY 2013 OIA Payments by Insular Area Assistance to Territories ($’000, 2013$) Compact of Free Association— Current ($’000, 2013$) Compact of Free Association— Permanent ($’000, 2013$) Fiscal Payments ($’000, 2013$) Total OIA Payments ($’000, 2013$) American Samoa 35,302 — 14 — 35,316 Guam 11,224 — 16,827 78,736 106,787 Northern Mariana Islands 12,958 — 1,930 — 14,888 U.S. Virgin Islands 5,440 — — 263,130 268,570 Micronesia 1,748 — 106,663 — 108,411 Marshall Islands 2,164 499 68,090 — 70,753 Palau 711 13,455 — — 14,166 Othera 17,310 — 11,576 — 28,886 Total 86,856 13,954 205,100 341,866 647,776 a This other category represents payments being spent outside the seven insular areas, such as Washington, DC; Hawaii; and others. Source: RTI estimates based on detailed budget information provided by OIA (2013a, 2013b) ES.2 Study Methodology Total economic impacts are the sum of direct economic impact and indirect/induced economic impact resulting from recipient organizations’ consumption of goods and services and household spending by organizations’ employees. RTI reviewed employment, employee compensation, and activity trends for each insular area to estimate the direct impact of OIA payments. In 2012, economic data for the U.S. Territories—American Samoa, Guam, Northern Mariana Islands, and the U.S. Virgin Islands—became available. This was an indirect result of OIA funding given to BEA to develop more robust economic data for the U.S. territories. Unlike the economic base analysis model, an input/output (I/O) modeling framework allows specific multipliers to be calculated for each industry. Although the economic base analysis performed can use more recent data, it often relies on an amalgamation of various sources. Using the input-output analysis to estimate the economic impacts of OIA payments produces more accurate results because data come from a single data source. For FAS—Micronesia, Marshall Islands, and the Republic of Palau—indirect/induced impacts were estimated using economic base analysis (EBA). The reasoning underlying EBA is that an individual region’s economic activity is derived from its “base” or “primary” sectors, which are defined as those sectors whose revenue is received primarily from outside the Executive Summary ES-5 region. Base sectors often include manufacturing, mining, agriculture, and fisheries that produce goods for export and activities that are funded by the U.S. federal government and aid organizations. EBA is best applied to small, relatively specialized regions whose economies rely to a larger extent on exports (Wang and vom Hofe, 2007). Consequently, this methodological approach is well suited to studying the economies of the FAS. RTI also conducted a supplemental analysis of the economic impact of OIA spending on Washington, DC, and Hawaii. ES.3 Economic Impact Results RTI estimated the direct, indirect/induced, and total economic impacts of OIA payments on each insular area in terms of employment, employee compensation, and GDP. Estimates of local employment supported by OIA payments are presented in Table ES-4. Table ES-4. Estimated Employment Impact of OIA Payments (FY 2013) Direct Employment Impact (#) Indirect/Induced Employment Impact (#) Total Employment Impact (#) National Employment Supported by OIA Payments (#) American Samoa 1,107 130 1,237 9% Guam 3,926 159 4,085 15% Northern Mariana Islands 661 125 787 4% U.S. Virgin Islands 7,248 765 8,012 21% Micronesia 2,471 5,409 7,880 52% Marshall Islands 1,556 2,042 3,598 34% Palau 271 471 742 8% Total 17,240 9,100 26,341 16% Source: RTI estimates for the four U.S. territories are based on IMPLAN (2013). Estimates for the three FAS were based on PITI-VITI (2013a, 2013b, 2013c). In the cases of the Marshall Islands and Micronesia, a significant portion of national employment is directly and indirectly supported by OIA payments. Approximately 52% of total recorded employment in Micronesia was either directly or indirectly supported by OIA payments. These data do not include subsistence agriculture or fishing. Estimates of the amount of employee compensation supported by OIA payments are presented in Table ES-5. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas ES-6 Table ES-5. Estimated Employee Compensation Impact of OIA Payments (FY 2013) Direct Employee Compensation Impact ($’000, 2013$) Indirect/Induced Employee Compensation Impact ($’000, 2013$) Total Employee Compensation Impact ($’000, 2013$) National Employee Compensation Supported by OIA Payments ($’000, 2013$) American Samoa 27,137 1,997 29,134 17% Guam 105,065 2,976 108,042 12% Northern Mariana Islands 12,675 1,722 14,397 3% U.S. Virgin Islands 266,380 20,123 286,503 23% Micronesia 14,213 42,066 56,279 81% Marshall Islands 16,360 19,611 35,971 35% Palau 2,982 4,800 7,782 9% Total 444,812 93,295 538,107 16% Source: RTI estimates for the four U.S. territories are based on IMPLAN (2013). Estimates for the three FAS were based on PITI-VITI (2013a, 2013b, 2013c). In the cases of the Marshall Islands and Micronesia, a significant portion of national employee compensation is directly and indirectly supported by OIA payments. For example, approximately 81% of total estimated recorded employee compensation in the Federated States of Micronesia is either directly or indirectly supported by OIA payments. Estimates of the amount of GDP supported by OIA payments are presented in Table ES-6. Based on RTI’s analysis of the economics of each insular area, we determined that for every $1.00 of GDP directly supported by OIA payments, approximately $0.70 of GDP was supported elsewhere in the insular economy, on average. As a result, a significant portion of national employee compensation is directly and indirectly supported by OIA payments. For example, approximately 44% of total GDP in the Marshall Islands is either directly or indirectly supported by OIA payments. Executive Summary ES-7 Table ES-6. Estimated GDP Impact of OIA Payments (FY 2013) Direct GDP Impact ($’000, 2013$) Indirect/Induced GDP Impact ($’000, 2013$) Total GDP Impact ($’000, 2013$) National GDP Supported by OIA Payments (%) American Samoa 35,316 9,506 44,822 7% Guam 106,787 26,169 132,955 3% Northern Mariana Islands 14,888 7,414 22,303 3% U.S. Virgin Islands 268,570 143,780 412,350 9% Micronesia 66,455 119,531 185,986 56% Marshall Islands 33,654 44,165 77,819 44% Palau 7,877 24,943 32,821 14% Total 533,547 375,509 909,056 8% Source: RTI estimates for the four U.S. territories are based on IMPLAN (2013). Estimates for the three FAS were based on PITI-VITI (2013a, 2013b, 2013c). In addition to the analysis of the seven insular areas, RTI also conducted a supplemental analysis of the economic impact of OIA operations in Washington, DC, and Hawaii. RTI estimated that approximately $7.30 million of OIA’s operating budget was spent in Washington, DC, and approximately $15.6 million in Hawaii for OIA operations and to offset the impact Compact provisions have on Hawaii’s social infrastructure. To estimate the economic impacts, RTI used IMPLAN modeling software to construct input-output models of each region. Using these models, RTI estimated that OIA’s operations and payments would directly support 46 jobs in Washington, DC, receiving approximately $6.64 million of employee compensation, and support a total output of $8.72 million. In Hawaii, OIA spending in FY 2013 is estimated to support 203 employees, receiving $12.84 million of employee compensation, and a total output of $26.28 million. 1-1 1. INTRODUCTION The Office of Insular Affairs (OIA) contracted with RTI International to estimate the economic impacts of federal payments and grants from fiscal year (FY) 2013 to U.S.- affiliated insular areas. These areas are the U.S. territories of American Samoa, Guam, the Commonwealth of the Northern Mariana Islands (CNMI), and the U.S. Virgin Islands (USVI), and the freely associated states (FAS) of the Republic of the Marshall Islands (RMI), the Federated States of Micronesia (FSM), and the Republic of Palau. OIA distributed approximately $619 million in technical assistance, grants, and payments to the insular areas during FY 2013. These payments play an important role in each area’s economy, supporting local jobs and providing employee compensation in regions. The economic characteristics of these areas are displayed in Table 1-1. Table 1-1. Economic Characteristics by Insular Area Estimated Population (2012 #) Estimated Employment (#) Estimated Employee Compensation ($’000, 2013$) GDP ($’000, 2013) GDP per Capita (2013$) American Samoa 55,519 13,692 173,184 671,098 12,173 Guam 159,358 26,700 916,253 4,717,364 28,976 Northern Mariana Islands 53,310 21,399 464,919 674,205 12,647 U.S. Virgin Islands 106,405 38,454 1,221,177 4,511,271 42,842 Micronesia 102,843 15,281 69,431 330,938 3,218 Marshall Islands 52,921 10,618 102,208 174,985 3,292 Palau 20,472 8,944 90,516 231,761 13,278 United States 313,873,685 51,749 Sources: 2012 population estimates were obtained from the World Bank (2013b). Data on estimated 2012 GDP and GDP per capita for the four U.S. territories were collected from the BEA (2013) and are presented in 2013 terms. Data on estimated employment and employee compensation for the four U.S. territories are RTI estimates based on IMPLAN (2013). Data on estimated 2012 population, 2013 GDP, and GDP per capita for the three FAS were obtained from Pacific & Virgin Islands Training Initiatives (PITI-VITI) (2013a, 2013b, 2013c). 2013 GDP per capita for the United States was from the World Bank (2013a, 2013b). RTI constructed estimated employment and employee compensation statistics for the three FAS based on data obtained from PITI-VITI (2013a, 2013b, 2013c). Because the insular areas are not included in many U.S. statistical surveys of economic activity, critical data on local economic activity are often not captured. To some degree this changed through OIA funding of the Bureau of Economic Analysis (BEA) to develop better economic data for U.S. territories under the Statistical Improvement Project. BEA provides benchmark I/O data for the United States. The benchmark accounts show how industries Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 1-2 interact at the detailed level; specifically, they show how more than 500 industrial sectors provide input to, and use output from, each other to produce gross domestic product (GDP).1 These data are now available for U.S. territories, and they were used for this report. In this study, RTI estimated direct economic impacts and multipliers for estimating total economic impact, which includes indirect and induced impacts, for each of the seven insular area’s economies. Analysis results were designed to be integrated into a larger report that estimates the economic benefits of lands and other resources managed by the Department of the Interior (DOI), thus enabling OIA to report on its economic impacts in the same manner as other Department offices and bureaus (DOI, 2013). 1.1 FY 2013 OIA Payments to Insular Areas In FY 2013, OIA’s total budget was $648 million, of which $619 million was spent directly in the insular areas to provide assistance, grants, and compacts to the insular areas during the fiscal year. In this report, all assistance, grants, and compacts are referred to collectively as “payments,” the majority of which are considered mandatory (OIA, 2013b). OIA payments fund health care, education, government operations, roads, and other types of social and physical infrastructure. From a budgetary standpoint, payments can be separated into three primary categories:
Fiscal payments, which are the return of taxes collected by the U.S. federal government to Guam and the USVI, as required by law
Assistance to Territories, which provides general technical assistance; finances education and health care operations; funds and maintains essential infrastructure; and supports environmental initiatives, including Brown Tree Snake Control and the Coral Reef Initiative
Compact of Free Association, which distributes annual payments to FAS, per their treaties with the United States, and provides support to the U.S. western Pacific territories and Hawaii to offset the impact the Compact has on regional social infrastructure For the purposes of this analysis, RTI received detailed budget information from OIA, which was then used to estimate expenditures in each insular area related to OIA payments (Table 1-2). Although this determination was typically straightforward, in some cases determining where spending would be directed was not possible using readily available information. 1 These accounts provide detailed information on the flows of the goods and services that make up the production processes of industries. See http://www.bea.gov. Section 1 — Introduction 1-3 Table 1-2. FY 2013 OIA Payments by Insular Area Assistance to Territories ($’000, 2013$) Compact of Free Association— Current ($’000, 2013$) Compact of Free Association— Permanent ($’000, 2013$) Fiscal Payments ($’000, 2013$) Total OIA Payments ($’000, 2013$) American Samoa 35,302 — 14 — 35,316 Guam 11,224 — 16,827 78,736 106,787 Northern Mariana Islands 12,958 — 1,930 — 14,888 U.S. Virgin Islands 5,440 — — 263,130 268,570 Micronesia 1,748 — 106,663 — 108,411 Marshall Islands 2,164 499 68,090 — 70,753 Palau 711 13,455 — — 14,166 Othera 17,310 — 11,576 — 28,886 Total 86,856 13,954 205,100 341,866 647,776 a This other category represents payments being spent outside the seven insular areas, such as Washington, DC; Hawaii; and others. Sources: RTI estimates based on detailed budget information provided by OIA (2013a, 2013b). 1.2 Study Objectives The objectives of this study were to
estimate the direct economic impacts of OIA payments and indirect/induced multipliers and impacts relevant for OIA grant and payment categories for each insular area;
review FY 2013 grants and payments and determine affected economic sectors for the American Samoa Operations Grant, Brown Tree Snake Control, Compact of Free Association (permanent and current), Coral Reef Initiative, covenant grants, maintenance assistance fund, return of federal taxes to U.S. Virgin Islands and Guam, and technical assistance;
model the direct and indirect/induced economic impacts of FY 2013 grants and payments for each insular area and for each payment category;
compare the results between the IMPLAN analysis and EBA for the U.S. Territories;
prepare a final report that summarizes assumptions and provides tabular data on economic impacts. 1.3 Overview of Study Methodology In 2012, input-output data for the U.S. Territories—American Samoa, Guam, Northern Mariana Islands, and the U.S. Virgin Islands—became available following the Statistical Improvement Project. In contrast to the economic base analysis approach used for all Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 1-4 insular areas in previous reports, an I/O modeling framework allows more specific multipliers to be calculated for each industry.2 I/O models use multipliers to simulate how employment or income generated in one industry can generate additional jobs, income, and output in other industries and for the region’s economy as a whole. This allows for greater precision relative to using the economic base multiplier for all sectors. For the U.S. territories, we use both I/O analysis (via the software tool IMPLAN) to calculate the total impacts of OIA payments as well as EBA for consistency with previous versions of the OIA payments analysis. We also discuss the differences in the results when compared to the economic base analysis in Section 10 of this report. RTI also used IMPLAN to model the economic impact of OIA activities in Washington, DC, and Hawaii, areas in which OIA has operations. Although the economic impacts of government spending for the U.S. territories are estimated using I/O models, no I/O data were available for the three Freely Associated States (FAS), Federated States of Micronesia, Marshall Islands, and the Republic of Palau. As such, RTI developed multipliers for the FAS using economic base analysis.3 The reasoning underlying EBA is that an individual region’s economic activity is derived from its “base” or “primary” sectors, which are defined as those sectors whose revenue is received primarily from outside the region—base sectors typically include manufacturing firms, mines, and farms that produce goods for export and activities that are funded by the federal government (Klosterman, 1990). As a result, EBA is best applied to small, relatively specialized regions whose economies rely to a larger extent on exports (Wang and vom Hofe, 2007). Consequently, this methodological approach is well suited to studying the economies of the insular areas. Estimating the economic impact of federal funds on economic aggregates like regional employment is typically accomplished using a simple mathematical representation of a region’s economy, such as ∆Y = s*∆X (1.1) 2 The IMPLAN data for each U.S. Territory is based on data calculated by the BEA for the territories in 2009. 3 Other researchers have used I/O models for Hawaii to model economic impacts for U.S. insular territories; however, RTI does not recommend this approach because it assumes that the economic structure of the insular area is the same as that for Hawaii (see Pike [2007]). The model is also static and does not adjust for sectoral responses to materially significant shocks. Another alternative, but one that requires extensive data collection, would be the same as that employed in a 2008 analysis performed for the Department of Commerce and American Samoa (see ASDC [2008]). This latter method is resource intensive but may narrow the confidence interval surrounding economic multipliers. Section 1 — Introduction 1-5 where ∆Y is the change in total employment, ∆X is the change in base-sector employment (direct impact), and s is total employment/base-sector employment (the base employment multiplier). This model represents how an increase in base-sector employment will generate a larger increase in the region’s total employment because of the ripple effect as new base-sector employees spend money on locally produced goods and services. This ripple effect is quantified by the “s” term, called the “base employment multiplier,” which is typically estimated by taking the ratio of total employment to base-sector employment. Using this core approach as a starting point for modeling the economy of each FAS (as well as the secondary method to estimating economic impacts of US territories), RTI estimated economic impacts in a short time period using available economic data. First, RTI computed an estimate of direct impacts for each of the grant and payment categories. This entailed combining these data with existing information on employment and income associated with government spending and other economic activities. Direct impacts are usually computed using ratios of employment or income created per dollar of government funding that have been derived from historical data. Second, to estimate the combined indirect and induced impact, RTI calculated multipliers for employment, income, and GDP by examining the economic structure and activities of each FAS. To obtain more accurate measures of the direct employment impact of OIA payments, one must obtain an understanding of who receives these payments and what they are being spent on. For example, OIA payments used to fund a construction project will have different employment impacts than OIA payments used to fund education. Therefore, the first question asked when creating a more refined analysis is how OIA payments should be classified or treated as direct impacts. For the purposes of this study, OIA payments can be classified in six different ways:
Education: payments associated with training or education inside the relevant insular area.
Construction: payments associated with building new or maintaining existing structures.
Government: payments associated with general government operations or general technical assistance.
Health care: payments associated with providing medical and other health care services. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 1-6
Private: this classification is used only for payments to the Prior Service Benefits program. Beneficiaries receive this money in appreciation for their service during World War II, and it generates an economic impact when recipients spend it on goods and services. Because data are not available on the spending behavior of these beneficiaries, precise output and employee compensation to employee ratios was difficult to obtain. Therefore, RTI typically used ratios that represented averages for the private nonagricultural sector and assumed 100% of beneficiary funds were spent locally.
Wholesale: payments associated with purchasing goods or equipment from local wholesalers (companies involved in the resale, sale without transformation, of new and used goods to retailers; to industrial, commercial, institutional, or professional users; or to other wholesalers). This treatment assumes that the goods or equipment themselves were not manufactured in the insular area. In addition to improving our classification of OIA payments, this study sought to refine economic impact estimates in a second way. Generally, only standard industries (agriculture, mining, manufacturing, and federal government) were assumed to be part of the economic base. However, many insular areas attract a number of tourists, which also contributes to the economic base. Similarly, government operations that are funded from external sources should also be included in measures of economic base employment and employee compensation. 1.4 Methodological Limitations Although I/O and EBA have several advantages that make them the most reasonable methodological approaches, several limitations are associated with it that one must keep in mind when interpreting analysis results. First, the quality of economic base multipliers relies heavily on the quality of the data being used. Most developing areas have a substantial informal sector composed of subsistence agriculture and fishing, domestic aids, street vendors, producers of clothing and handicrafts, and other workers whose occupation and income often go unreported. Although accurate data on the size and makeup of the informal sector are difficult to gather, the informal sector in developing island areas was assumed to make up a significant percentage of official employment and income statistics. In a study of 110 countries, Schneider (2002) found that the informal sector made up 41% of official gross national income in developing countries and 38% in transition countries. Lal and Raj (2006) compiled data on the informal sector in developing island nations (data on the insular areas were not included) and found that self-employment as a percentage of total nonagricultural employment averaged 35% for the six islands for which these data were available. Data on the informal sector in the Pacific Island areas may be particularly difficult to obtain because, as a result of the rural nature of these areas, most informal workers operate from homes Section 1 — Introduction 1-7 rather than working as street vendors, transportation providers, or other typically urban occupations (Duncan and Voigt-Graf, 2008). Because of the size of the informal sector in the insular areas, much of the data used in this analysis likely underestimate employment, labor income, and GDP. Subsistence agriculture often makes up a substantial portion of unreported employment. A 1996 survey in Palau estimated the value of the primarily agricultural informal sector at $5 million, or twice the size of the recorded agricultural sector in that year. Most of these goods, however, are consumed by the household and traded informally and do not reach the market (FAO, 2006). Second, with EBA, the division between base and nonbase sectors is often unclear. In this analysis, RTI used standard assumptions for identifying which sectors are considered base and nonbase. However, companies within these sectors are often engaged in satisfying both local and external demand. For example, local manufacturers may produce products that are exported and also consumed by local residents. This concern can often be minimized by using techniques for better estimating the portions of each sector that are truly base and nonbase (for example, surveys can be used to collect this information directly from local businesses); however, given the time and data constraints, these techniques were not feasible for this analysis. Lastly, EBA in particular focuses exclusively on external demand. Therefore, supply constraints are assumed to not be binding, and nondemand factors that may contribute to regional growth are ignored (such as capital accumulation or productivity improvements). Because supply-side considerations are typically most important for long-term growth, EBA is best suited for short-term analyses. 1.5 Data Limitations For the FY 2013 analysis, we were able to better estimate GDP base multipliers for each insular area and used newly available I/O data for U.S. territories. This higher level of analysis was possible because of new estimates of GDP released by the BEA in September 2013. Up-to-date employment, employee compensation, and GDP data were available for the FAS through new reports released in October 2013 by PITI-VITI. In addition, PITI-VITI’s Performeter Reports4 for each insular area, now released annually, provided updated information on percentage of government operations that are funded by external sources. These reports helped better estimate aspects of the base economy. 4 A Performeter Report takes government financial statements and converts these measures into an easy to measure overall rating of government performance and financial health. The Performeter Report also provides trend data of government finance measure such as fund balances, net assets, and revenue dispersion (PITI-VITI 2013d). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 1-8 When possible, RTI tried to incorporate newer economic data into the FY 2013 EBA model in order to update the output-to-employee and employee compensation-to-employee ratios, as well as the base multipliers. These data are essential to determining the direct and indirect impacts of OIA payments, and we believed these inclusions would better describe the significance of funding given the changing economies of the insular areas. Incorporating these new data sets did, however, cause some of the data to come from differing years. For example, to achieve updated employee compensation-to-employee ratios for the U.S. territories, we used newly released data from the 2011 County Business Patterns (released by the U.S. Census in April 2013). However, these data sets lacked information about sales in each sector, and output-to-employee ratios could not be determined. RTI had to rely on the 2007 Economic Census for these ratios. This approach assumes that employment and compensation have changed over time in the territories, but output-to-employee has remained constant since 2007. Because most of the insular areas have experienced some economic decline since 2007, using output-to-employee ratios from 2007 may underestimate the impacts of OIA payments. During periods of decline and recovery, output-to-employee tends to increase (BEA, 2013); Bureau of Labor Statistics [BLS], 1986). The data from the Census also often exclude information about agricultural and public- sector employment, which leads to even more agglomeration of sources and assumptions to complete the employment statistics. For the FAS, economic data rely on studies that are funded by the OIA through the PITI- VITI educational program. Although RTI was able to update employment data and employment compensation-to-employee ratios for each of these areas, data on output were unavailable. Therefore, we had to assume that the output-to-employee for these three areas was comparable to that of American Samoa. American Samoa was chosen as the best U.S. Territory comparison because it was most similar to the FAS in terms of GDP per capita and other economic measures. This assumption is also likely an overestimate of the FAS’s true output-to-employee ratio because American Samoa has a higher GDP per capita. The use of American Samoa data as a proxy will likely underestimate the impacts of OIA spending because more jobs will be supported by each dollar of OIA spending. 1.6 Report Organization A separate report section detailing the payments, economic multipliers, and economic impacts was prepared for each insular area (Sections 2 through 8). In addition, a section for Washington, DC, and Hawaii was prepared (Section 9), because OIA locates significant operations in these regions. Section provides a comparison between newer IMPLAN data and the economic base analysis that has been provided in previous studies. Section 10 summarizes economic impact data for all FY 2013 payments. 2-1 2. AMERICAN SAMOA 2.1 FY 2013 OIA Payments Summary American Samoa faces a number of obstacles to economic development, including limited land and resources, a small population, limited local technical expertise, a narrow economic base, and vulnerability to natural disasters. The American Samoa economy is highly dependent on the tuna cannery industry, which accounts for the majority of its exports. In 2009, one of two major tuna canneries closed because of foreign competition, and this closure has caused economic decline and unemployment. Also in 2009, American Samoa was affected by an earthquake and tsunami. Increased government spending and construction activities in response to the disaster helped American Samoa’s real GDP grow by 0.5% in 2011(BEA, 2013). However, in 2012 real GDP dropped by 2.4%, largely due to continued decline in consumer spending (BEA, 2013). The average GDP per capita for American Samoa in 2012 was $11,427 (in 2013 U.S. dollars) compared with approximately $51,749 in the United States (BEA, 2013; World Bank, 2013a). OIA strives to foster economic development, promote sound management, and improve quality of life in American Samoa. OIA payments to American Samoa in FY 2013 totaled $35.3 million and were primarily directed toward the government and construction sectors with additional support for education and health care (Table 2-1). The largest block of OIA payments came in the form of Assistance to Territories funding, the largest proportion of which is operations grants that total $22.7 million. These grants are used to fund basic Samoan government operations and to support the American Samoa High Court (the highest court in American Samoa excluding the U.S. Supreme Court) and the operation of the LBJ Hospital. The American Samoa Operations Grants made up approximately 18% of American Samoa’s general fund and 18% of LBJ Hospital’s revenue in recent years (OIA, 2013a). Other Assistance to Territories funding, totaling $11.1 million, was used to fund economic development programs, judicial training, and other initiatives such as the Compact Impact Discretionary, which provides funding to offset impacts to the educational systems from immigration of FAS citizens, as well as the PITI-VITI. PITI-VITI was established to assist island governments in developing superior leadership, financial stability, accountability, program effectiveness, and economic growth. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 2-2 Table 2-1. American Samoa: OIA Payments (FY 2013) Appropriation Spending ($’000, 2013$) Impact Treatment Compact of Free Association Compact impact 14 Education Total, Compact of Free Association 14 Assistance to Territories American Samoa operations grant—Basic operations 13,971 Government American Samoa operations grant—LBJ hospital operations 7,848 Health Care American Samoa operations grant—High court 887 Government Subtotal, American Samoa Operations Grants 22,706 General technical assistance—Direct Grants 373 Government General technical assistance—USDA Grad School PITI-VITI 313 Education General technical assistance—Close-Up Foundation 154 Education General technical assistance—Judicial Training 53 Government Subtotal, General Technical Assistance 892 Empowering Insular Communities Wholesale Purchases 514 Wholesale Installations 514 Construction Capacity Building 514 Government Subtotal, Empowering Insular Communities 1,543 Northern Mariana Covenant Grants—American Samoa construction 9,964 Construction Office of Insular Affairs 195 Government Compact Impact Discretionary 2 Education Subtotal, Other Assistance to Territories 10,161 Total, Assistance to Territories 35,302 Total Spending Inside American Samoa 35,316 Source: RTI estimates based on OIA (2013a, 2013b). In addition to funding received from OIA’s Assistance to Territories, American Samoa also received $14,000 through the Compact of Free Association Compact Impact Grant, which offsets costs incurred by American Samoan health, educational, and social systems from in- migration of FAS residents. American Samoa allocated its FY 2013 appropriated compact impact payments toward training materials and equipment for the education of college nursing students. Section 2 — American Samoa 2-3 2.2 Economic Impacts of OIA Payments Using Economic Base Analysis Although the primary economic results were estimated using input-output analysis, the following EBA results are provided to maintain consistency with previous reports. The input- output driven economic results for American Samoa are in Section 2.3. 2.2.1 Direct Economic Impacts Direct economic impacts of OIA payments were assigned to four economic sectors— education, construction, government, and health care. To calculate the employment and employee compensation impacts associated with this spending, as described in the methodology, we used the following “output” and employee compensation-to-employee ratios:1
Education: Based on sales and employment data from the 2007 Economic Census for American Samoa, the average output-to-employee ratio in the education sector (North American Industry Classification System [NAICS] 61) was $44,907 per employee (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to- employee ratio of $50,454. Based on payroll and employment data from the Census 2011 County Business Patterns for American Samoa, the average employee compensation-to-employee ratio in the education sector was $12,954 per employee. Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $13,416 (Census, 2013).
Construction: Based on sales and employment data from the 2007 Economic Census for American Samoa, the average output-to-employee ratio in the construction sector (NAICS 23) was $52,431 per employee (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to-employee ratio of $58,908. Based on payroll and employment data from the Census 2011 County Business Patterns for American Samoa, the average employee compensation-to-employee ratio in the construction sector was $16,238 per employee (Census, 2013). Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $16,816.
Government: According to American Samoa’s Basic Financial Statements (American Samoa Treasury Department [ASTD], 2010), the government of American Samoa received approximately $225 million in revenue and employed 6,035 individuals in 2009. Adjusting for inflation, this implies an output-to-employee ratio of $40,491. Because data on government employee compensation were unavailable, the average employee compensation-to-employee ratio for nonagricultural private-sector workers ($14,601) from the 2011 County Business Patterns was used as a proxy (Census, 2013). Adjusting for inflation, this implies an employee compensation-to-employee ratio of $15,122 in 2013 dollars.
Health care: Based on sales and employment data from the 2007 Economic Census for American Samoa, the average output-to-employee ratio in the health care sector (NAICS 62) was $37,445 per employee (Census, 2009). Adjusting this ratio to 2011 1 All adjustments for inflation were made using the U.S. Consumer Price Index for All Urban Consumers (BLS, 2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 2-4 dollars gives an output-to-employee ratio of $42,071. Based on payroll and employment data from the Census 2011 County Business Patterns for American Samoa, the average employee compensation-to-employee ratio in the health care sector was $19,038 per employee (Census, 2013). Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $19,716. Dividing the payments directed toward each sector by the output-to-employee ratio yields the direct employment impacts. Multiplying the direct employment impacts by the employee compensation-to-employee ratio yields the direct employee compensation impacts. Direct impacts are reported in Table 2-2. Table 2-2. American Samoa: Estimated Direct Economic Impacts Using EBA (FY 2013) Industry FY2012 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) Education 482 50,454 13,416 10 128 Construction 10,478 58,908 16,816 178 2,991 Government 15,993 40,491 15,122 395 5,973 Health care 7,848 42,071 19,717 187 3,678 Wholesale 514 1,050,461 15,728 0.49 8 Total 35,316 769 12,770 Sources: RTI estimates based on Census (2009, 2013), ASTD (2010), and OIA (2013a, 2013b). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 2.2.2 Employment and Employee Compensation Base Multipliers The employment and employee compensation multipliers were developed using the best available employment and employee compensation data for American Samoa (Table 2-3). Table 2-3 was developed from a combination of data sources. First, total employment for American Samoa as a whole was listed in the 2011 Government Accountability Office (GAO) report as 15,434 total employees for the year 2009. Employment in the tuna cannery industry for 2009 was estimated by applying the average change in employment in the sector from 2001 to 2008, which was obtained from American Samoa’s Financial Statement (ASTD, 2010). Next, employment for the remaining industries was distributed assuming that the proportion of total employment associated with each remaining industry was the same as it was in 2002. 2002 employment data by industry were obtained from American Samoa Department of Commerce [ASDC] [2008]). After employment by industry was estimated, total employee compensation in each industry was estimated by applying Section 2 — American Samoa 2-5 Table 2-3. American Samoa: Employment and Employee Compensation by Industry (2011 estimates) Industry Employment Estimates, 2011 Employee Compensation ($’000, 2013$) Economic Base Industries Agriculture, fishing, and mining 361 247 Government—American Samoa governmenta 2,906 33,882 Government—Federal government 110 1,314 Manufacturing—Fish processing 3,843 75,773 Manufacturing—Other 39 611 Tourism—Accommodation 31 359 Tourism—Food services and drinking places 396 5,316 Noneconomic Base Industries Construction 415 6,978 Educational and health care services 532 11,242 Financial activities 227 3,424 Information 204 3,669 Other services 244 4,802 Professional and business services 625 12,314 Retail trade 1,287 18,313 Transportation and warehousing 545 10,802 Utilities 344 6,786 Wholesale trade 244 3,332 Total 12,351 199,167 a Because 59% of American Samoa’s budget comes from external sources, we assumed that only 59% of the employment and employee compensation associated with the territorial government was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Sources: RTI estimates based on Census (2013), USDA (2011), GAO (2011), ASTD (2010), and ASDC (2008). 2013 employment estimates were based on the rate of decline in total employment from 2002 to 2011 from Census (2013) employment data for 2011. All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). employee compensation-to-employee ratios for each industry that were obtained from the 2011 County Business Patterns and 2007 Agricultural Census to the employment totals (Census, 2013; USDA, 2011). Because employee compensation data for government employees were not available from either of these sources, government employees were assumed to earn the same employee compensation-to-employee as the average for the nonagricultural private sector. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 2-6 The economic base of American Samoa is agriculture, fishing, mining, manufacturing, and federal government activities. Industries supported by tourism can also be considered part of the economic base. Ideally, data would be available on measures of the number of employees who are supported by tourism. However, because these data were unavailable, we assumed that the entire accommodation and food services industries are supported by tourism and, therefore, are part of the economic base.2 This is likely a conservative approach because, to the extent that this approximation overrepresents the portion of the economy supported by tourism, employment and employee compensation multipliers will be reduced. In addition to these industries, a portion of American Samoa’s territorial government is considered part of the economic base. Because an average of approximately 59% of American Samoa’s budget comes from external sources, this analysis assumes 59% of territorial government employment is considered base employment (PITI-VITI, 2013d). Based on these assumptions and the data in Table 2-3, we calculated the following multipliers:
Base employment multiplier: Base employment was calculated to include 7,685 employees out of a total of 12,351. Dividing total employment by base employment yields a multiplier of 1.83, meaning that for every base employment position supported by OIA funding, an estimated 0.83 additional jobs are formed elsewhere in the economy.
Employee compensation multiplier: Employee compensation associated with base employment was estimated to be $107 million. Dividing total employee compensation by base employee compensation yields a base multiplier of 1.87, meaning that every dollar of employee compensation supported by the 2013 spending will create an additional $0.87 in employee compensation. Multiplying the direct employment impact and employee compensation impacts in Table 2-2 by these multipliers yields a total employment impact of 1,407 employees and a total employee compensation impact of $23.9 million. 2.2.3 GDP Base Multipliers In recent years, OIA has funded the U.S. Bureau of Economic Analysis (BEA) under the Statistical Improvement Program to estimate more detailed and accurate economic data for the U.S. territories. In September 2013, the BEA released updated economic reports for each U.S. territory, including American Samoa, which included an estimate of GDP by industry. With this new data, we were able to better estimate GDP multipliers, making for a more detailed analysis of the GDP impacts of OIA payments. 2 A similar approach for creating a proxy for measuring the role of tourism in insular area economies was used in GAO (2006). Section 2 — American Samoa 2-7 Direct GDP impacts are the sum of OIA payments to insular governments plus the impacts of OIA payments on private sectors. A GDP-to-employee ratio was used to determine the direct GDP impacts of OIA payments in the private sector. It is estimated that American Samoa’s GDP was $648 million in 2012, or $671 million in 2013 dollars (BEA, 2013). Dividing this by the total number of employees estimated to be working in American Samoa (12,351) implies a GDP-to-employee ratio of $54,336. Multiplying this ratio by the direct employment impact in the private sector (374 employees) yields a direct private-sector GDP impact of $20.3 million. This private-sector impact is then added to the $16 million of OIA payments spent in the public sector to produce an estimate of approximately $36.3 million in direct GDP impacts. To determine the indirect and induced effects of OIA payments on GDP, we used the recent BEA data (Table 2-4) on GDP by industry to calculate a base multiplier using the same methodology as the employment and employee compensation base multipliers. It was assumed that the federal government and manufacturing sectors were economic base sectors, along with 59% of the territorial government. The remaining territorial government and nonmanufacturing sectors were included in the noneconomic base industries. Table 2-4. American Samoa: GDP by Industry (2011) Sector GDP (in millions of 2013$) Economic base industries Government—Federal 18 Government—Territoriala 176 Manufacturing 23 Noneconomic base industries Nonmanufacturing 455 Total 671 a Because 59% of American Samoa’s budget comes from external sources, we assumed that only 59% of the GDP associated with the territorial government was part of the base sector. The remaining GDP was assumed to be part of the nonbase sector. Source: RTI estimates based on BEA (2013). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Based on these assumptions and the data in Table 2-4, base GDP was calculated to be $160 million. Dividing total GDP by base GDP yields a multiplier of 4.20, meaning that for every dollar of base GDP supported by OIA funding, an estimated 3.20 of additional GDP dollars are formed elsewhere in the economy. By multiplying the direct GDP impacts of OIA payments by the GDP base multiplier, we estimate the total impact on GDP is $153 million. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 2-8 2.2.4 EBA Economic Impact Estimate The $35.3 million of OIA payments directly support 769 jobs, $12.8 million in employee compensation, and $36.3 million in GDP. Accounting for secondary effects, we estimate that OIA spending supports a total of 1,407 jobs, $23.9 million in employee compensation, and $153 million in GDP. A summary of economic impact measures is presented in Table 2-5. Table 2-5. American Samoa: Total Estimated Economic Impact Using EBA (FY 2013) Direct Impact Indirect/Induced Economic Impact Total Economic Impact Employment (#) 769 638 1,407 Employee compensation ($’000; 2013$) 12,770 11,091 23,861 GDP ($’000; 2013$) 36,313 116,314 152,542 Sources: RTI estimates based on Census (2009, 2013), OIA (2013a, 2013b), PITI-VITI (2013d), GAO (2011), ASTD (2010), ASDC (2008), USDA (2011), and BEA (2013). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 2.3 Economic Impacts of OIA Payments Using Input-Output Analysis To determine the direct impacts of OIA payments in American Samoa, the payments from Table 2-1 were each applied to a corresponding IMPLAN sector code. Direct impacts were estimated using output and employee compensation-to-employee ratios within the IMPLAN modeling system. The direct employment, employee compensation, and output inputs are reported in Table 2-6. We estimated that the $35.3 million spent in American Samoa directly supported 1,107 jobs and $27.1 million in employee compensation. These direct impacts were multiplied by Type II Social Accounting Matrix multipliers to estimate the total impact of OIA payments on the region’s economy. The relevant multipliers that were estimated for this analysis are reported in Table 2-7. Note the OIA payments from 2013 are treated as the output inputs. Using these multipliers, we compute the total economic impacts associated with OIA payments to American Samoa. The total economic impacts of this activity in American Samoa support 1,237 employees, $29.1 million in employee compensation, and $44.8 million in GDP. These results are displayed in Table 2-8. Section 2 — American Samoa 2-9 Table 2-6. American Samoa: Direct Economic Impacts of OIA Payments Using I/O Analysis (FY 2013) Industry IMPLAN Code FY2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) State and Local Government, non- Education 437 15,993 $27,566 $27,566 580 15,993 State and Local Government, Education 438 482 $20,140 $20,140 24 482 Hospitals 397 7,848 $32,933 $24,774 238 5,904 Wholesale trade business 319 514 $934,956 $14,314 1 8 Maintenance and repair construction of nonresidential structures 39 10,478 $39,688 $17,992 264 4,750 Total 35,316 1,107 27,137 Source: RTI estimates based IMPLAN (2013). Table 2-7. American Samoa: Selected IMPLAN Multipliers by Industry Industry Description IMPLAN Code Total Employment Impact Multiplier Total Employee Compensation Multiplier Total Output Impact Multiplier State and Local Government, non- Education 437 1.12 1.07 1.32 State and Local Government, Education 438 1.09 1.07 1.32 Hospitals 397 1.12 1.07 1.25 Wholesale trade business 319 1.90 1.89 1.07 Maintenance and repair construction of nonresidential structures 39 1.11 1.10 1.21 Source: RTI estimates based IMPLAN (2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 2-10 Table 2-8. American Samoa: Total Economic Impacts Using I/O Analysis (FY 2013) Industry Description IMPLAN Code Total Employmen t Impact (# of workers) Total Employee Compensation Impact ($’000 2013$) Total Output Impact ($’000 2013$) State and Local Government, non- Education 437 650 $17,073 $21,083 State and Local Government, Education 438 26 $515 $635 Hospitals 397 266 $6,326 $9,838 Wholesale trade business 319 1 $15 $548 Maintenance and repair construction of nonresidential structures 39 294 $5,205 $12,718 Total 1,237 $29,134 $44,822 Source: RTI estimates based IMPLAN (2013). The significance of OIA’s economic contributions can be better understood when viewed in relation to the American Samoa economy as a whole, which is summarized in Table 2-9. As this table illustrates, the 1,237 jobs directly and indirectly supported by OIA payments represent 9% of American Samoa’s estimated total employment. Similarly, $29.1 million of employee compensation associated with these employees accounts for approximately 15% of total employee compensation inside the region, and the $44.8 million of GDP associated with these employees represents 7% of total GDP produced by the insular area. Table 2-9. American Samoa: Estimated Impact Relative to National Economy (FY2013) Total Economic Impact for FY2013 OIA Payments National Data Impact as Percentage of Total Economy Employment (#) 1,237 13,692 9% Employee compensation ($’000; 2013$) 29,134 173,184 17% GDP ($’000; 2013$) 44,822 671,098 7% Source: RTI estimates based IMPLAN (2013). 3-1 3. GUAM 3.1 FY 2013 OIA Payments Summary Although among the wealthier of the insular areas, Guam continues to face challenges in implementing effective government, health care, and education systems. Guam’s economy is largely based on tourism from Asia and is, therefore, sensitive to regional consumer spending trends. Tourism sectors like accommodations and amusement have only recently begun to experience growth after years of decline. Guam is also experiencing growth due to proposed relocation of 8,000 U.S. Marines from the military base in Okinawa, Japan, to the insular area by the end of 2014. In addition to the relocation of U.S. Marines, the US Navy’s Joint Program Office issued an Environmental Impact Statement that estimated a far greater impact resulting from the military realignment. According to the study, the total military population on Guam would increase by 30,190, including 9,182 permanent military personnel, 9,950 dependents, 9,222 transient military personnel, and 1,836 civilian workers (Kan, 2013). Additionally, nearly 80,000 construction workers and contractors could be present at the height of relocation in 2014. The Department of Defense has been the largest contributor to GDP in recent years as the federal government has been supporting construction and infrastructure preparations on the island (BEA, 2012). From 2011 to 2012, real GDP of Guam grew by 0.5% (BEA, 2013). The average GDP per capita for Guam in 2012 was $29,976 (2013$), about 56% of the GDP per capita of the United States ($51,749) (BEA, 2013; World Bank, 2013a). OIA payments to Guam in FY 2013 totaled $106.8 million and were primarily directed to the government sector with additional support for education and construction. A detailed breakdown of OIA payments is presented in Table 3-1. The largest block of OIA payments, totaling $78.7 million, came in the form of fiscal payments associated with Section 30 Income Taxes. These are funds transferred by OIA from the U.S. Treasury to Guam and largely consist of federal income taxes paid by military personnel stationed on Guam, immigration fees, and miscellaneous duties (Limtiaco, 2008). OIA also provided nearly $17 million through the Compact of Free Association, which Guam intends to use for a variety of equipment purchases and infrastructure. Guam received $1.9 million through the Assistance to Territories—General Technical Assistance payments, which provided direct grants, judicial training, and funding for the PITI-VITI and the Close-Up Foundation. The Close Up Foundation is a civic education program designed to teach democracy and citizenship and improve civic education in the insular areas. Other technical assistance programs, which made up about $9.3 million of the Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 3-2 Table 3-1. Guam: OIA Payments (FY 2013) Appropriation Spending ($’000, 2013$) Impact Treatment Fiscal Payments Guam Section 30 income taxes 78,736 Government Total, Fiscal Payments 78,736 Compact of Free Association DPW Schools Leaseback 7,100 Education GMHA Operations Offset 6,000 Government GPD Operations Offset 2,850 Government DPW School Bus Satellite Facilities Renovations 350 Wholesale DISID Individualized Budget Program 200 Government BSP Centralized Data Center Project 300 Government Balance 27 Government Total, Compact of Free Association 16,827 Assistance to Territories General technical assistance—Direct Grants 1,376 Government General technical assistance—USDA Grad School PITI-VITI 313 Education General technical assistance—Close-Up Foundation 154 Education General technical assistance—Judicial Training 53 Government Subtotal, General Technical Assistance 1,896 Brown Tree Snake Control 200 Government Northern Mariana Covenant Grants—Guam construction 6,128 Construction Maintenance assistance 200 Government Compact Impact Discretionary 2,800 Education Subtotal, Other 9,328 Total, Assistance to Territories 11,224 Total Spending Inside Guam 106,787 Source: RTI estimates based on OIA (2013a, 2013b). Assistance to Territories payments, include infrastructure maintenance assistance, funding for Guam Construction, and Brown Tree Snake Control. The Brown Tree Snake Control program is intended to fund research and implementation techniques to eradicate this invasive species. OIA distributed funds for the Compact Impact Discretionary, which provides funding to offset impacts to the educational systems from immigration of FAS citizens. Section 3 — Guam 3-3 3.2 Economic Impacts of OIA Payments Using Economic Base Analysis Although the primary economic results were estimated using input-output analysis, the following EBA results are provided to maintain consistency with previous reports. The input- output driven economic results for Guam are in Section 3.3. 3.2.1 Direct Economic Impacts Direct economic impacts of OIA payments were assigned to four economic sectors— education, construction, government, and wholesale. To calculate the employment and employee compensation impacts associated with this spending, as described in the methodology, we used the following output and employee compensation-to-employee ratios:1
Education: Based on sales and employment data from the 2007 Economic Census for Guam, the average output-to-employee ratio in the education sector (NAICS 61) was $38,853 per employee (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to-employee ratio of $43,653. Based on payroll and employment data from the Census 2011 County Business Patterns for Guam, the average employee compensation-to-employee ratio in the education sector was $21,473 per employee. Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $22,238 (Census, 2013).
Construction: Based on sales and employment data from the 2007 Economic Census for Guam, the average output-per-employee ratio in the construction sector (NAICS 23) was $96,302 per employee (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to-employee ratio of $108,199. Based on payroll and employment data from the Census 2011 County Business Patterns for Guam, the average employee compensation-to-employee ratio in the construction sector was $24,208 per employee (Census, 2013). Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $25,115.
Government: According to Guam’s Office of Finance and Budget, the revenue of the government of Guam was estimated to be $552 million (GBSP, 2012a). The government of Guam employed approximately 11,705 individuals in 2011 accordingly to the GBSP’s 2010 Statistical Yearbook Updates (GBSP, 2012a). This implies an output-per-employee ratio of $47,194. Because data on government employee compensation were unavailable, the average employee compensation-per- employee ratio for nonagricultural private-sector workers ($24,028) from the 2011 County Business Patterns was used as a proxy (Census, 2013). Adjusting for inflation, this implies an employee compensation-to-employee ratio of $25,115.
Wholesale: Based on sales and employment data from the 2007 Economic Census, the average output-per-employee ratio in the wholesale sector (NAICS 42) was $334,104 (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to- employee ratio of $375,379. Based on payroll and employment data from the Census 2011 County Business Patterns for Guam, the average employee 1 All adjustments for inflation were made using the U.S. Consumer Price Index for All Urban Consumers (BLS, 2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 3-4 compensation-to-employee ratio in the wholesale sector was $26,519 per employee (Census, 2013). Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $27,464. Dividing the payments directed toward each sector by the output-to-employee ratio yields the direct employment impacts, while multiplying the direct employment impacts by the employee compensation-to-employee ratio yields the direct employee compensation impacts. Direct impacts are reported in Table 3-2. Table 3-2. Guam: Estimated Direct Economic Impacts Using EBA (FY 2013) Industry FY2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) Education 10,366 43,653 22,238 237 5,281 Construction 6,128 108,199 25,115 57 1,422 Government 89,943 48,876 24,885 1,840 45,794 Wholesale 350 375,379 27,464 1 26 Total 106,787 2,135 52,523 Sources: RTI estimates based on Census (2009, 2013), OIA (2013a, 2013b), GOFB (2010), and GBSP (2012a). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 3.2.2 Employment and Employee Compensation Base Multipliers The employment and employee compensation multipliers were developed using the best available employment and employee compensation data presented in Table 3-3. This table was developed from a combination of data sources. First, 2011 data on employment by industry and military employment were obtained from the 2011 Statistical Yearbook Updates. Next, employee compensation for each industry was estimated by applying the annual payroll to employee ratios found in the 2011 County Business Patterns and from the 2007 Agricultural Census (adjusted for inflation) to the employment totals (Census, 2013; USDA, 2009a). For the government and military sectors, the average employee compensation-to-employee ratio for nonagricultural private-sector workers was used as a proxy. The economic base of Guam is agriculture, manufacturing, and federal government activities. Industries supported by tourism can also be considered part of the economic base. Ideally, data would be available on the number of employees supported by tourism. However, because these data were unavailable, we assumed that the entire accommodation and food services industries are supported by tourism and are, therefore, part of the Section 3 — Guam 3-5 Table 3-3. Guam: Estimated Employment and Employee Compensation by Industry (2013) Industry Employment (2011 #) Employee Compensation ($’000, 2013$) Economic Base Industries Agriculture 300 503 Government—Government of Guama 11,705 291,279 Government—Federal government (military) 6,275 156,153 Government—Federal government (non-military) 4,033 100,349 Manufacturing 1,718 47,903 Tourism—Accommodation and food services 7,644 119,969 Noneconomic Base Industries Construction 6,073 152,511 Finance, insurance, and real estate 2,688 106,160 Other services 9,639 217,570 Trade 13,580 292,508 Transportation 4,373 186,306 Total 68,025 1,671,210 a Note that because 35% of Guam’s budget comes from external sources, it was assumed that only 35% of the employment and employee compensation associated with the territorial government was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Sources: RTI estimates based on GBSP (2012a, 2012b), Census (2013), and USDA (2009a). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). economic base.2 This is likely a conservative approach because, to the extent that this approximation overrepresents the portion of the economy supported by tourism, employment and employee compensation multipliers will be reduced. In addition to these industries, a portion of Guam’s territorial government is considered part of the economic base. Because 35% of Guam’s government revenue comes from external sources, 35% of territorial government employment was included in the base employment for the purpose of calculating base multipliers (PITI-VITI, 2013d).3 Based on these assumptions and the data in Table 3-3, the following multipliers were calculated: 2 A similar approach for creating a proxy for measuring the role of tourism in insular area economies was used in GAO (2006). 3 The government of Guam also receives support from various other federal government agencies, not solely the OI, including the Department of Education, Department of Health and Human Services, and Department of Homeland Security (GAO, 2006). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 3-6
Base employment multiplier: Base employment was calculated to include 23,939 employees out of a total of 68,025. Dividing total employment by base employment yields a multiplier of 2.84, meaning that for every base employment position supported by OIA funding, an estimated 1.84 additional jobs are formed elsewhere in the economy.
Employee compensation multiplier: Employee compensation associated with base employment was estimated to be $524 million. Dividing total employee compensation by base employee compensation yields a base multiplier of 3.19, meaning that every dollar of employee compensation will create an additional $2.19 in employee compensation elsewhere in the economy. Multiplying the direct employment impact and employee compensation impacts in Table 3-2 by these multipliers yields a total employment impact of 6,065 employees and a total employee compensation impact of $168 million. 3.2.3 GDP Base Multipliers In recent years, OIA has funded the BEA under the Statistical Improvement Program to estimate more detailed and accurate economic data for the U.S. territories. In September 2013, the BEA released updated economic reports for each U.S. territory, including Guam, which included for the first time an estimate of GDP by industry. With this new data, we were able to better estimate GDP multipliers, making for a more detailed analysis of the GDP impacts of OIA payments. Direct GDP impacts are the sum of OIA payments to insular governments plus the impacts of OIA payments on private sectors. A GDP-to-employee ratio was used to determine the direct GDP impacts of OIA payments in the private sector. It is estimated that Guam’s GDP was $4,555 million in 2012, or $4,717 million in 2013 dollars (BEA, 2013). Dividing this by the total number of employees estimated to be working in Guam (68,025) implies a GDP-to- employee ratio of $69,348. Multiplying this ratio by the direct employment impact in the private sector (295 employees) yields a direct private-sector GDP impact of $20.5 million. This private-sector impact is then added to the $86.3 million of OIA payments spent in the public sector to produce an estimate of approximately $110 million in direct GDP impacts. To determine the indirect and induced effects of OIA payments on GDP, we used the recent BEA data (Table 3-4) on GDP by industry to calculate a base multiplier using the same methodology as the employment and employee compensation base multipliers. It was assumed that the federal government and accommodation and amusement sectors were economic base sectors, along with 35% of the territorial government. The remaining territorial government, construction, distributive services, and other private sectors were included in the noneconomic base industries. Section 3 — Guam 3-7 Table 3-4. Guam: GDP by Industry (2011) GDP by Industry, 2011a GDP (in millions of 2013$) Economic Base Industries Government—Federal 1,459 Government—Territorialb 858 Accommodation and Amusement 405 Noneconomic Base Industries Construction 291 Distributive Services 405 Other private 1,301 Total 4,717 a 2011 data are used in the table because disaggregated industry data were not available for 2012, despite 2012 GDP being presented in the text. b Note that because 35% of Guam’s budget comes from external sources, it was assumed that only 35% of the employment and employee compensation associated with the territorial government was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Sources: RTI estimates based on BEA (2013). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Based on these assumptions and the data in Table 3-4, base GDP was calculated to be $2,156 million. Dividing total GDP by base GDP yields a multiplier of 2.19, meaning that for every dollar of base GDP supported by OIA funding, an estimated 1.19 of additional GDP dollars are formed elsewhere in the economy. By multiplying the direct GDP impacts of OIA payments by the GDP base multiplier, we estimate the total impact on GDP is $242 million. 3.2.4 EBA Economic Impact Estimate The $106.8 million of OIA payments directly supports 2,135 jobs, $52.5 million in employee compensation, and $110 million in GDP. Accounting for secondary effects, we estimate that OIA spending supports a total of 6,065 jobs,$168 million in employee compensation, and $242 million in GDP. A summary of economic impact measures is presented in Table 3-5. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 3-8 Table 3-5. Guam: Total Estimated Economic Impact Using EBA (FY 2013) Direct Impact Indirect/Induced Economic Impact Total Economic Impact Employment (#) 2,135 3,930 6,065 Employee compensation ($’000; 2013$) 52,523 115,018 167,541 GDP ($’000; 2013$) 110,402 131,192 241,594 Sources: RTI estimates based on Census (2009, 2013), GBSP (2012a, 2012b), GOFB (2010), OIA (2013a, 2013b), PITI-VITI (2013d), USDA (2009a), and BEA (2013). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 3.3 Economic Impacts of OIA Payments Using Input-Output Analysis To determine the direct impacts of OIA payments in Guam, the payments from Table 4-1 were each applied to a corresponding IMPLAN sector code. Direct impacts were estimated using output and employee compensation-to-employee ratios from the IMPLAN modeling system. The direct employment, employee compensation, and output inputs are reported in Table 3-6. Table 3-6. Guam: Direct Economic Impacts of OIA Payments Using I/O Analysis (FY 2013) Industry IMPLAN Code FY2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) State and Local Government, non-Education 437 89,943 $27,566 $27,566 3,263 89,943 State and Local Government, Education 438 10,366 $20,140 $20,140 515 10,366 Wholesale trade business 319 350 $334,104 $23,270 1 24 Maintenance and repair construction of nonresidential structures 39 6,128 $41,622 $32,141 147 4,732 Total 106,787 3,926 105,065 Source: RTI estimates based IMPLAN (2013). Section 3 — Guam 3-9 We estimated that the $107 million spent in Guam directly supported 3,926 jobs and $105.1 million in employee compensation. These direct impacts were multiplied by Type II Social Accounting Matrix multipliers to estimate the total impact of OIA payments on the state’s economy. The relevant multipliers that were estimated for this analysis are reported in Table 3-7. Note the OIA payments from 2013 are treated as the output inputs. Table 3-7. Guam: Selected IMPLAN Multipliers by Industry Industry Description IMPLAN Code Total Employment Impact Multiplier Total Employee Compensatio n Multiplier Total Output Impact Multiplie r State and Local Government, non- Education 437 1.04 1.03 1.25 State and Local Government, Education 438 1.03 1.03 1.25 Wholesale trade business 319 1.27 1.29 1.09 Maintenance and repair construction of nonresidential structures 39 1.05 1.03 1.21 Source: RTI estimates based IMPLAN (2013). By multiplying the direct impacts of each sector with their corresponding Type II SAM Multiplier, we can compute the total economic impacts associated with OIA payments to Guam. The total economic impacts of this activity in Guam support 4,085 employees, $108 million in employee compensation, and $133 million in GDP. These results are displayed in Table 3-8. Table 3-8. Guam: Total Economic Impacts Using I/O Analysis (FY 2013) Industry Description IMPLAN Code Total Employment Impact (# of workers) Total Employee Compensatio n Impact ($’000, 2013) Total Output Impact ($’000, 2013) State and Local Government, non- Education 437 3,398 $92,467 $112,216 State and Local Government, Education 438 530 $10,657 $12,933 Wholesale trade business 319 1 $31 $380 Maintenance and repair construction of nonresidential structures 39 155 $4,886 $7,426 Total 4,085 $108,042 $132,955 Source: RTI estimates based IMPLAN (2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 3-10 The significance of OIA’s economic contributions can be better understood when viewed in relation to the Guam economy as a whole, which is summarized in Table 3-9. As this table illustrates, the 4,085 jobs directly and indirectly supported by OIA payments represent 15% of Guam’s total employment. Similarly, $108 million of employee compensation associated with these employees accounts for approximately 12% of total employee compensation inside the region, and the $133 million of GDP associated with these employees represents 3% of total GDP produced by the region. Table 3-9. Guam: Estimated Impact Relative to National Economy (FY 2013) Total Economic Impact for FY2013 OIA Payments National Data Impact as Percentage of Total Economy Employment (#) 4,085 26,700 15% Employee compensation ($’000; 2013$) 108,042 916,253 12% GDP ($’000; 2013$) 132,955 4,717,364 3% Source: RTI estimates based IMPLAN (2013). 4-1 4. COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS (CNMI) 4.1 FY 2013 OIA Payments Summary In 2012, the GDP per capita for CNMI was approximately $12,674 (2013$), close to 25% of the U.S. GDP per capita $51,749 (BEA, 2013; World Bank, 2013a). This represents a decline of approximately 15% from 2010 to 2012 GDP (in 2013$). Once home to a billion-dollar garment industry, garment factories closed in the face of foreign competition; as a result, real GDP declined steadily. However, in 2012, real GDP increased by 5.2% from 2011 due to an increase in territorial government spending, exports of goods and services, and tourism services (BEA, 2013). OIA payments to CNMI in 2013 totaled $14.9 million and were primarily directed to the construction and government sectors with additional support for education and the private sector (Table 4-1). Assistance to Territories payments, totaling about $13 million, made up the majority of funding to CNMI. General technical assistance, which made up $2 million of all Assistance to Territories, provided payments for direct grants, judicial training, and PITI- VITI. Also included in general technical assistance were the Close Up Foundation, the CNMI Ombudsman’s Office, CNMI Immigration, Labor and Law Enforcement General, Compact Impact (discretionary) and the Prior Service Benefits Program, which issues benefits to CNMI citizens who worked for the U.S. Navy or the U.S. Trust Territory of the Pacific Islands from 1944 through 1968. The remainder of the Assistance to Territories funding went to other activities such as the Coral Reef Initiative, maintenance assistance, construction, and Brown Tree Snake Control. OIA also provided $1.9 million through the Compact of Free Association, which CNMI intends to use for a variety of government purposes, including funding for the Department of Public Health and Division of Youth Services. 4.2 Economic Impacts of OIA Payments Using Economic Base Analysis Although the primary economic results were estimated using input-output analysis, the following EBA results are provided to maintain consistency with previous reports. The input- output driven economic results for CNMI are in Section 4.3. 4.2.1 Direct Economic Impacts Direct economic impacts of OIA payments were assigned to four economic sectors— education, construction, government, and the general private sector. To calculate the Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 4-2 Table 4-1. CNMI: OIA Payments (FY 2013) Appropriation Spending ($’000, 2013$) Impact Treatment Compact of Free Association Department of Public Health 779 Government Division of Youth Services 50 Government Department of Public Safety 515 Government Department of Corrections 185 Government Office of Public Defender 27 Government Northern Mariana College 167 Education Public School System 177 Education Balance 30 Government Total, Compact of Free Association 1,930 Assistance to Territories General technical assistance—Direct Grants 885 Government General technical assistance—USDA Grad School PITI-VITI 313 Education General technical assistance—Close-Up Foundation 154 Education General technical assistance—Prior Service 219 Private General technical assistance—Judicial Training 53 Government General technical assistance—Ombudsman’s Office 250 Government General technical assistance—Immigration, Labor and Law Enforcement 150 Government Subtotal, General Technical Assistance 2,023 Empowering Insular Communities Wholesale Purchases 622 Wholesale Installations 400 Construction Capacity Building 400 Government Subtotal, Empowering Insular Communities 1,422 Brown Tree Snake Control 404 Government Coral Reef Initiative 41 Government Maintenance assistance 13 Government Northern Mariana Covenant Grants—CNMI construction 8,732 Construction Office of Insular Affairs 2 Government Compact Impact Discretionary 321 Education Subtotal Other 9,513 Total, Assistance to Territories 12,958 Total Spending Inside CNMI 14,888 Source: RTI estimates based on OIA (2013b). Section 4 — CNMI 4-3 employment and employee compensation impacts associated with this spending, as described in the methodology, we used the following output and employee compensation- to-employee ratios:1
Education: Based on sales and employment data from the 2007 Economic Census for CNMI, the average output-to-employee ratio in the education sector (NAICS 61) was $26,228 (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to- employee ratio of $29,468. Based on payroll and employment data from the Census 2011 County Business Patterns for CNMI, the average employee compensation-to- employee ratio in the education sector was $15,264 per employee (Census, 2013). Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $15,808.
Construction: Based on sales and employment data from the 2007 Economic Census for CNMI, the average output-to-employee ratio in the construction sector (NAICS 23) was $59,466 (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to-employee ratio of $66,812. Based on payroll and employment data from the Census 2011 County Business Patterns for CNMI, the average employee compensation-to-employee ratio in the construction sector was $7,217 (Census, 2013). Adjusting this ratio to 2013 dollars gives an employee compensation-to- employee ratio of $7,474.
Government: According to CNMI’s Single Audit Financial Statements, the government of CNMI received approximately $260 million in revenue in 2010 or $260 million in 2013 dollars (CNMI Office of the Public Auditor, 2012). We calculated government employment to be 4,582 individuals based on reports from the CNMI Department of Commerce (2012a, 2012b). This implies a government revenue-to- employee ratio of $60,617 in 2013 dollars. Because data on government employee compensation were unavailable, the average employee compensation-to-employee ratio for nonagricultural private-sector workers ($14,666) from the Census 2011 County Business Patterns was used as a proxy (Census, 2013). Adjusting for inflation, this implies an employee compensation-to-employee ratio of $15,189.
Wholesale: Based on sales and employment data from the 2007 Economic Census, the average output-per-employee ratio in the wholesale sector (NAICS 42) was $163,909 (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to- employee ratio of $184,159. Based on payroll and employment data from the Census 2011 County Business Patterns for Guam, the average employee compensation-to-employee ratio in the wholesale sector was $14,354per employee (Census, 2013). Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $14,866.
Private: Based on sales and payroll data from the 2007 Economic Census, the average output-to-employee in the nonagricultural private sector was $56,767 (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to-employee ratio of $63,780. Based on payroll and employment data from the Census 2011 County Business Patterns for CNMI, the average employee compensation-to- employee ratio in the nonagricultural private sector was $14,666 (Census, 2013). 1 All adjustments for inflation were made using the U.S. Consumer Price Index for All Urban Consumers (BLS, 2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 4-4 Adjusting this ratio for inflation gives an employee compensation-to-employee ratio of $115,189. Dividing the payments directed toward each sector by the output-to-employee ratio yields the direct employment impacts, while multiplying the direct employment impacts by the employee compensation-to-employee ratio yields the direct employee compensation impacts. Direct impacts are reported in Table 4-2. Table 4-2. CNMI: Estimated Direct Economic Impacts Using EBA (FY 2013) Industry FY2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation-to- Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) Education 1,131 29,468 15,808 38 607 Construction 9,132 66,812 7,474 137 1,022 Government 3,784 60,617 15,189 62 948 Wholesale 622 184,159 14,866 3 50 Private 219 63,780 15,189 3 52 Total 14,888 244 2,679 Sources: RTI estimates based on Census (2009, 2013), OIA (2013b), CNMI Office of the Public Auditor (2012), and CNMI Department of Commerce (2012a, 2012b). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 4.2.2 Employment and Employee Compensation Base Multipliers The employment and employee compensation multipliers were developed using the employment and employee compensation data presented in Table 4-3. CNMI Department of Commerce conducted a workforce study called the Prevailing Wage and Workforce Assessment Study (PWWAS) that sampled a large percentage of CNMI’s workforce. The PWWAS study was released in two parts. The first portion of the PWWAS study listed total employment in CNMI to be 21,399 employees based on government tax data in 2011 (CNMI Department of Commerce, 2012b). The second PWWAS report sampled 14,450 employees in CNMI and listed this sample employment by industry (CNMI Department of Commerce, 2012a). To estimate total employment by sector, employment was distributed assuming that the proportion of total employment associated with each industry was the same as it was in the PWWAS sample. After estimating the employment by industry, we estimated total employee compensation in each industry by applying employee compensation-to- employee ratios for each industry that were obtained from the 2011 County Business Patterns (Census, 2013). To estimate the employee compensation for the agriculture, mining, forestry, fishing and hunting sector we took the average between the compensation-to-employee ratios from the Agricultural Census and the 2011 County Section 4 — CNMI 4-5 Table 4-3. CNMI: Estimated Employment and Employee Compensation by Industry (2011 estimates) Industry Employment (2011 #) Payroll ($000s 2013 USD) Economic Base Industries Agriculture, Mining, Forestry, Fishing and Hunting 67 5,551 Government 4,582 34,293 Manufacturing 576 7,321 Tourism—Accommodation and food services 2,937 32,372 Tourism—Arts, entertainment, and recreation 541 6,733 Noneconomic Base Industries Utilities 542 84,365 Construction 1,259 9,408 Wholesale trade 589 8,762 Retail trade 2,346 32,295 Transportation and warehousing 908 15,226 Information 391 10,912 Finance and insurance 215 6,032 Real estate and rental and leasing 772 9,977 Professional, scientific, and technical services 501 14,733 Management, Administrative, Support, and Waste Mang and Remediation Srvs 1,511 128,431 Educational services 2,301 36,379 Health care and social assistance 338 7,166 Other services (except public administration) 1,026 14,962 Total 21,399 464,919 a Note that because 31% of CNMI’s budget comes from external sources, it was assumed that only 31% of the employment and employee compensation associated with the territorial government was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Sources: RTI estimates based on Census (2013) (USDA, 2009b), and CNMI Department of Commerce (2012a, 2012b). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Business Patterns and applied it to the number of employees (USDA, 2009b; Census, 2013). To estimate employee compensation information for the public administration industry, we used the average employee compensation-to-employee ratio for nonagricultural, private- sector industries. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 4-6 The economic base of CNMI is agriculture, fishing, mining, and manufacturing. Industries supported by tourism can also be considered part of the economic base. Ideally, data would be available on the number of employees who are supported by tourism. However, because these data were unavailable, we assumed that the entire accommodation and food services and arts, entertainment, and recreation industries are supported by tourism and are, therefore, part of the economic base.2 This is likely a highly conservative approach because, to the extent that this approximation overrepresents the portion of the economy supported by tourism, employment and employee compensation multipliers will be reduced. In addition to these industries, a portion of CNMI’s territorial government is considered part of the economic base. Specifically, because 31% of CNMI’s government revenue comes from external sources, only 31% of territorial government (public administration) employment was included in the base employment for the purpose of calculating base multipliers (PITI- VITI, 2013d).3 Based on these assumptions and the data in Table 4-3, we calculated the following multipliers:
Base employment multiplier: Base employment was calculated to include 6,140 employees out of a total of 21,399. Dividing total employment by base employment yields a multiplier of 3.48, meaning that for every base employment position supported by OIA funding, an estimated 2.48 additional jobs are formed elsewhere in the economy.
Employee compensation multiplier: Employee compensation associated with base employment was estimated to be $67.1 million. Dividing total employee compensation by base employee compensation yields a base multiplier of 6.93, meaning that every dollar of employee compensation will create an additional $5.93 in employee compensation elsewhere in the economy. Multiplying the direct employment impact and employee compensation impacts in Table 4-2 by these multipliers yields a total employment impact of 851 employees and a total employee compensation impact of $18.6 million. 4.2.3 GDP Base Multipliers In recent years, OIA has funded the BEA under the Statistical Improvement Program to estimate more detailed and accurate economic data for the U.S. Territories. In September 2013, the BEA released updated economic reports for each U.S. Territory, including CNMI, which included for the first time an estimate of GDP by industry. With this new data, we 2 A similar approach for creating a proxy for measuring the role of tourism in insular area economies was used in GAO (2006). 3 In addition to payments from the OIA and the Department of the Interior, the government of CNMI also receives support from various other federal government agencies, including the Department of Agriculture, Department of Health and Human Services, and Department of Homeland Security (GAO, 2006). Section 4 — CNMI 4-7 were able to better estimate GDP multipliers, making for a more detailed analysis of the GDP impacts of OIA payments. Direct GDP impacts are the sum of OIA payments to insular governments plus the impacts of OIA payments on private sectors. A GDP-to-employee ratio was used to determine the direct GDP impacts of OIA payments in the private sector. It is estimated that CNMI’s GDP was $651 million in 2011, or $674 million in 2013 dollars (BEA, 2013). Dividing this by the total number of employees estimated to be working in CNMI (21,399) implies a GDP-to- employee ratio of $31,506. Multiplying this ratio by the direct employment impact in the private sector (182 employees) yields a direct private-sector GDP impact of $5.7 million. This private-sector impact is then added to the $3.8 million of OIA payments spent in the public sector to produce an estimate of approximately $9.5 million in direct GDP impacts. To determine the indirect and induced effects of OIA payments on GDP, we used the recent BEA data (Table 4-4) on GDP by industry to calculate a base multiplier using the same methodology as the employment and employee compensation base multipliers. It was assumed that the federal government, manufacturing, accommodation, and amusement sectors were economic base sectors, along with 31% of the territorial government. The remaining territorial government, distributive services, and other private sectors were included in the noneconomic base industries. Table 4-4. CNMI: GDP by Industry (2011) GDP by Industry, 2011a GDP (in millions of 2013$) Economic Base Industries Government—Federal 14 Government—Territorialb 206 Manufacturing 25 Accommodation and Amusement 94 Noneconomic Base Industries Distributive Services 90 Other private 244 Total 674 a 2011 data are used in the table because disaggregated industry data were not available for 2012, despite 2012 GDP being presented in the text. b Note that because 31% of CNMI’s budget comes from external sources, it was assumed that only 31% of the employment and employee compensation associated with the territorial government was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Sources: RTI estimates based on BEA (2013). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 4-8 Based on these assumptions and the data in Table 4-4, base GDP was calculated to be $224 million. Dividing total GDP by base GDP yields a multiplier of 3.00, meaning that for every dollar of base GDP supported by OIA funding, an estimated 2.00 of additional GDP dollars are formed elsewhere in the economy. By multiplying the direct GDP impacts of OIA payments by the GDP base multiplier, we estimate the total impact on GDP is $28.6 million. 4.2.4 EBA Economic Impact Estimate The $14.9 million of OIA payments directly support 241 jobs, $2.6 million in employee compensation, and $9.5 million in GDP. Accounting for secondary effects, we estimate that OIA spending supports a total of 851 jobs, $18.6 million in employee compensation, and $28.6 million in GDP. A summary of economic impact measures is presented in Table 4-5. Table 4-5. CNMI: Total Estimated Economic Impact Using EBA (FY 2013) Direct Economic Impact Indirect/Induced Economic Impact Total Economic Impact Employment (#) 244 607 851 Employee compensation ($’000; 2013$) 2,679 15,883 18,562 GDP ($’000; 2013$) 9,515 19,061 28,576 Sources: RTI estimates based on Census (2009, 2013), OIA (2013b), (USDA, 2009b), PITI-VITI (2013d), BEA (2013), CNMI Office of the Public Auditor (2012), and CNMI Department of Commerce (2012a, 2012b). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 4.3 Economic Impacts of OIA Payments Using Input-Output Analysis To determine the direct impacts of OIA payments in CNMI, the payments from Table 3-1 were each applied to a corresponding IMPLAN sector code. Direct impacts were estimated using output and employee compensation-to-employee ratios from the IMPLAN model software. For the Prior Service Benefits we used the average ratios of the entire private sector. The direct employment, employee compensation, and output inputs are reported in Table 4-6. We estimated that the $14.9 million spent in CNMI directly supported 661 jobs and $12.7 million in employee compensation. These direct impacts were multiplied by Type II Social Accounting Matrix multipliers to estimate the total impact of OIA payments on the region’s economy. For the private sector, we used the average multiplier across all private sector industries. The relevant multipliers that were estimated for this analysis are reported in Table 4-7. Note the OIA payments from 2013 are treated as the output inputs. Section 4 — CNMI 4-9 Table 4-6. CNMI: Direct Economic Impacts of OIA Payments Using I/O Analysis (FY 2013) Industry IMPLAN Code FY2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee ) Employee Compensation -to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) State and Local Government, non-Education 437 3,784 $27,566 $27,566 137 3,784 State and Local Government, Education 438 1,131 $20,140 $20,140 56 1,131 Wholesale trade business 319 622 $163,909 $11,518 4 44 Maintenance and repair construction of nonresidential structures 39 9,132 $19,825 $16,646 461 7,668 Private Sector — 219 $61,359 $13,447 4 48 Total 14,888 661 12,675 Source: RTI estimates based IMPLAN (2013). Table 4-7. CNMI: Selected IMPLAN Multipliers by Industry Industry Description IMPLAN Code Total Employment Impact Multiplier Total Employee Compensatio n Multiplier Total Output Impact Multiplie r State and Local Government, non- Education 437 1.25 1.13 1.54 State and Local Government, Education 438 1.18 1.13 1.54 Wholesale trade business 319 1.60 1.81 1.22 Maintenance and repair construction of nonresidential structures 39 1.17 1.14 1.50 Private Sector — 1.31 1.31 1.37 Source: RTI estimates based IMPLAN (2013). By multiplying the direct impacts of each sector with their corresponding Type II SAM Multiplier, we can compute the total economic impacts associated with OIA payments to CNMI. The total economic impacts of this activity in CNMI support 787 employees, $14.4 million in employee compensation, and $22.3 in GDP. These results are displayed in Table 4-8. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 4-10 Table 4-8. CNMI: Total Economic Impacts Using I/O Analysis (FY 2013) Industry Description IMPLAN Code Total Employment Impact (# of workers) Total Employee Compensatio n Impact ($’000, 2013) Total Output Impact ($’000, 2013) State and Local Government, non- Education 437 172 $4,260 $5,837 State and Local Government, Education 438 67 $1,273 $1,745 Wholesale trade business 319 6 $79 $760 Maintenance and repair construction of nonresidential structures 39 537 $8,722 $13,662 Private Sector — 5 $63 $299 Total 787 $14,397 $22,303 Source: RTI estimates based IMPLAN (2013). The significance of OIA’s economic contributions can be better understood when viewed in relation to the CNMI economy as a whole, which is summarized in Table 4-9. As this table illustrates, the 787 jobs directly and indirectly supported by OIA payments represent 1% of CNMI’s total employment. Similarly, $14.4 million of employee compensation associated with these employees accounts for approximately 2% of total employee compensation inside the region, and the $22.3 million of GDP associated with these employees represents 3% of total GDP produced by the region. Table 4-9. CNMI: Estimated Impact Relative to National Economy (FY2013) Total Economic Impact for FY2013 OIA Payments National Data Impact as Percentage of Total Economy Employment (#) 787 21,399 4% Employee compensation ($’000; 2013$) 14,397 464,919 3% GDP ($’000; 2013$) 22,303 674,205 3% Source: RTI estimates based IMPLAN (2013). 5-1 5. U.S. VIRGIN ISLANDS (USVI) 5.1 FY 2013 OIA Payments Summary In 2012, the GDP per capita in USVI was about $42,842 (2013$) compared with $51,749 in the United States (BEA, 2013; World Bank, 2013a). USVI’s economy relies heavily on tourism and oil refining. The economy of USVI shrunk in both 2011 and 2012, however, by 6.6% and13.2% in 2011 and 2012, respectively. The sharp decline is largely attributable to decreases in exported goods and territorial government spending (BEA, 2013). One of the world’s largest oil refineries, the Hovensa refinery, shut down operations on St. Croix in 2012, which greatly affected USVI’s net trade (BEA, 2013). The petroleum refining industry primarily reflects the drop in GDP from 2011 to 2012. OIA payments to USVI in 2013 totaled $268.6 million (Table 5-1). The largest block of OIA payments to USVI came in the form of Rum Excise Tax Payments totaling $263 million. Under current U.S. law, excise taxes are collected on rum imported into the United States that is not of USVI or Puerto Rican origin. A fixed percentage of these excise taxes is distributed by the U.S. government to USVI. Although this funding is not designated for a particular purpose, USVI generally uses it to finance public infrastructure or provide support to the rum industry (Maguire and Teefy, 2010). The Assistance to Territories—General Technical Assistance payments totaled about $2.3 million and provided for general technical assistance for direct grants, the Close Up Foundation, and the PITI-VITI, which are jointly managed by the USDA Graduate School. USVI experienced a substantial increase in OIA payments from FY 2012 to FY 2013, mostly because of higher expected returns from the rum excise taxes. Through other Assistance to Territories programs, which made up $3.2 million in payments, OIA funds items such as USVI construction as part of the Northern Mariana Covenant Grant, and the Coral Reef Initiative, which pursues the sustainable maintenance and protection of coral reefs through education, outreach programs, and the establishment of protected areas. 5.2 Economic Impacts of OIA Payments Using Economic Base Analysis Although the primary economic results were estimated using input-output analysis, the following EBA results are provided to maintain consistency with previous reports. The input- output driven economic results for USVI are in Section 3.3. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 5-2 Table 5-1. USVI: OIA Payments (FY 2013) Appropriation Spending ($’000; 2013$) Impact Treatment Fiscal Payment USVI rum excise tax payments 263,130 Government Total, Fiscal Payments 263,130 Assistance to Territories General technical assistance—Direct Grants 1,798 Government General technical assistance—USDA Grad School PITI-VITI 313 Education General technical assistance—Close-Up Foundation 154 Education Subtotal, General Technical Assistance 2,264 Coral Reef Initiative 150 Government Northern Mariana Covenant Grants—USVI construction 2,896 Construction Office of Insular Affairs 130 Government Subtotal, Other 3,176 Total, Assistance to Territories 5,440 Total Spending Inside Virgin Islands 268,570 Source: RTI estimates based on OIA (2013b). 5.2.1 Direct Economic Impacts Direct economic impacts of OIA payments were assigned to three economic sectors— education, construction, and government. To calculate the employment and employee compensation impacts associated with this spending, as described in the methodology, we used the following “output” and employee compensation-to-employee ratios:1
Education: Based on sales and employment data from the 2007 Economic Census for USVI, the average output-to-employee ratio in the education sector (NAICS 61) was $66,737 (Census, 2009). Adjusting this ratio to 2013 dollars gives an output- per-employee ratio of $74,982. Based on payroll and employment data from the Census 2011 County Business Patterns for USVI, the average employee compensation-to-employee ratio in the education sector was $25,194 per employee. Adjusting this ratio to 2013 dollars gives an employee compensation-to-employee ratio of $26,092 (Census, 2013).
Construction: Based on sales and employment data from the 2007 Economic Census for USVI, the average output-to-employee ratio in the construction sector (NAICS 23) was $103,782 (Census, 2009). Adjusting this ratio to 2013 dollars gives an output-to-employee ratio of $116,604. Based on payroll and employment data from the Census 2011 County Business Patterns for USVI, the average employee 1 All adjustments for inflation were made using the U.S. Consumer Price Index for All Urban Consumers (BLS, 2013). Section 5 — USVI 5-3 compensation-to-employee ratio in the construction sector was $32,701 (Census, 2013). Adjusting this ratio to 2013 dollars gives an employee compensation-to- employee ratio of $33,866.
Government: According to the U.S. Virgin Islands Annual Economic Indicators (U.S. Virgin Islands Bureau of Economic Research, 2012), the government revenue-to- employee ratio in 2011 was $51,028. Adjusting for inflation, this ratio gives a revenue-to-employee ratio of $53,028. Because data on government employee compensation were unavailable, the average employee compensation-to-employee ratio for nonagricultural private-sector workers ($33,385) from the Census 2011 County Business Patterns was used as a proxy (Census, 2013). Adjusting for inflation gives an employee compensation-to-employee ratio of $34,576. Dividing the payments directed toward each sector by the output-to-employee ratio yields the direct employment impacts, while multiplying the direct employment impacts by the employee compensation-to-employee ratio yields the direct employee compensation impacts. Direct impacts are reported in Table 5-2. Table 5-2. USVI: Estimated Direct Economic Impacts Using EBA (FY 2013) Industry FY2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) Education 466 74,982 26,092 6 162 Construction 2,896 116,604 33,866 25 841 Government 265,208 53,028 34,576 5,001 172,923 Total 268,570 5,032 173,926 Sources: RTI estimates based on Census (2009, 2013), OIA (2013b), and U.S. Virgin Islands Bureau of Economic Research (2012). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 5.2.2 Employment and Employee Compensation Base Multipliers The employment and employee compensation multipliers were developed using the employment and employee compensation data presented in Table 5-3. This table was developed from a combination of data sources. First, employment and employee compensation information for nonagricultural, private-sector industries was obtained from the Census 2011 County Business Patterns. Next, employment and employee compensation data for the agricultural industry were obtained from the 2007 Agricultural Census (USDA, 2009c). Lastly, employment associated with the federal and territorial governments was obtained for 2010 from the USVI Annual Economic Indicators (U.S. Virgin Islands Bureau of Economic Research, 2012). To estimate employee compensation information for these Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 5-4 Table 5-3. USVI: Employment and Employee Compensation by Industry (2011 estimates) Industry Employment (#) Employee Compensation ($’000, 2013$) Economic Base Industries Agriculture 511 561 Government—Federal government 962 33,262 Government—Territorial governmenta 12,116 418,917 Mining, quarrying, and oil and gas extraction 10 853 Manufacturing 1,750 157,131 Tourism—Accommodation and food services 6,709 158,246 Tourism Arts, entertainment, and recreation 583 12,897 Noneconomic Base Industries Administrative and support and waste management and remediation services 1,988 54,429 Construction 1,957 66,276 Educational services 914 23,848 Finance and insurance 1,139 56,892 Health care and social assistance 2,241 83,148 Information 750 67,316 Management of companies and enterprises 89 4,783 Other services (except public administration) 2,294 88,182 Professional, scientific, and technical services 1,153 54,892 Real estate and rental and leasing 1,063 37,645 Retail trade 6,492 152,501 Transportation and warehousing 1,770 56,223 Utilities 175 15,673 Wholesale trade 779 30,097 Total 45,443 1,573,771 a Note that because 24% of USVI’s budget comes from external sources, we assumed that only 24% of the employment and employee compensation associated with the territorial government was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Sources: RTI estimates based on Census (2009, 2013), USDA (2009c), and U.S. Virgin Islands Bureau of Economic Research (2012). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Section 5 — USVI 5-5 government workers, we used the average employee compensation-to-employee ratio for nonagricultural, private-sector industries. The economic base of USVI is agriculture, fishing, mining, manufacturing, and federal government activities. Industries supported by tourism can also be considered part of the economic base. Ideally, data would be available on measures of the number of employees supported by tourism. However, because these data were unavailable, we assumed that the entire accommodation and food services industries are supported by tourism and therefore part of the economic base.2 This is likely a conservative approach because, to the extent that this approximation overrepresents the portion of the economy supported by tourism, employment and employee compensation multipliers will be reduced. In addition to these industries, a portion of USVI’s territorial government is considered part of the economic base. Because 24% of USVI’s government revenue comes from external sources, only 24% of territorial government employment was also included in the base employment for the purpose of calculating base multipliers (PITI-VITI, 2013d). Based on these assumptions and the data in Table 5-3, we calculated the following multipliers:
Base employment multiplier: Base employment was calculated to include 14,765 employees out of a total of 45,443. Dividing total employment by base employment yields a multiplier of 3.08, meaning that for every base employment position supported by OIA funding, an estimated 2.08 additional jobs are formed elsewhere in the economy.
Employee compensation multiplier: Employee compensation associated with base employment was estimated to be $510 million. Dividing total employee compensation by base employee compensation yields a base multiplier of 3.09, meaning that every dollar of employee compensation will create an additional $2.09 in employee compensation. Multiplying the direct employment impact and employee compensation impacts in Table 5-2 by these multipliers yields a total employment impact of 15,489 employees and a total employee compensation impact of $537 million. 5.2.3 GDP Base Multipliers In recent years, OIA has funded the BEA under the Statistical Improvement Program to estimate more detailed and accurate economic data for the U.S. Territories. In September 2013, the BEA released updated economic reports for each U.S. Territory, including USVI, which included for the first time an estimate of GDP by industry. With this new data, we were able to better estimate GDP multipliers, making for a more detailed analysis of the GDP impacts of OIA payments. 2 A similar approach for creating a proxy for measuring the role of tourism in insular area economies was used in GAO (2006). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 5-6 Direct GDP impacts are the sum of OIA payments to insular governments plus the impacts of OIA payments on private sectors. A GDP-to-employee ratio was used to determine the direct GDP impacts of OIA payments in the private sector. It is estimated that USVI’s GDP was $4,356 million in 2012, or $4,511 million in 2013 dollars (BEA, 2013). Dividing this by the total number of employees estimated to be working in USVI (45,443) implies a GDP-to- employee ratio of $99,273. Multiplying this ratio by the direct employment impact in the private sector (31 employees) yields a direct private-sector GDP impact of $3.1 million. This private-sector impact is then added to the $265 million of OIA payments spent in the public sector to produce an estimate of approximately $268 million in direct GDP impacts. To determine the indirect and induced effects of OIA payments on GDP, we used the recent BEA data (Table 5-4) on GDP by industry to calculate a base multiplier using the same methodology as the employment and employee compensation base multipliers. It was assumed that the federal government, good-producing industries, accommodation, and food services sectors were economic base sectors, along with 24% of the territorial government. The remaining territorial government, wholesale and retail trade, and other private sectors were included in the noneconomic base industries. Table 5-4. USVI: GDP by Industry (2011) GDP by Industry, 2011a GDP (in millions of 2013$) Economic Base Industries Goods-producing industries 971 Government—Federal 150 Government—Territorialb 729 Accommodation and Food Services 434 Noneconomic Base Industries Wholesale and retail trade 389 Other Services, except government 1,837 Total 4,511 a 2011 data are used in the table because disaggregated industry data were not available for 2012, despite 2012 GDP being presented in the text. b Note that because 24% of USVI’s budget comes from external sources, we assumed that only 24% of the employment and employee compensation associated with the territorial government was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Sources: RTI estimates based on BEA (2013). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Section 5 — USVI 5-7 Based on these assumptions and the data in Table 5-4, the base GDP was calculated to be $1,81 million. Dividing total GDP by base GDP yields a multiplier of 2.49, meaning that for every dollar of base GDP supported by OIA funding, an estimated 1.49 of additional GDP dollars are formed elsewhere in the economy. By multiplying the direct GDP impacts of OIA payments by the GDP base multiplier, we estimate the total impact on GDP is $668 million. 5.2.4 EBA Economic Impact Estimate In summary, the $269 million spent by OIA directly supports 5,032 jobs, $174 million in employee compensation, and $268 million in GDP. Accounting for the multiplier process, we estimate that OIA spending supports a total of 15,489 jobs, $537 million in employee compensation, and $668 million in GDP. A summary of economic impact measures is presented in Table 5-5. Table 5-5. USVI: Total Estimated Economic Impact Using EBA (FY 2013) Direct Economic Impact Indirect/Induced Economic Impact Total Economic Impact Employment (#) 5,032 10,456 15,489 Employee compensation ($’000; 2013$) 173,926 363,233 537,159 GDP ($’000; 2013$) 268,290 400,134 668,424 Sources: RTI estimates based on Census (2009, 2013), OIA (2013b), BEA (2013), USDA (2009c), and U.S. Virgin Islands Bureau of Economic Research (2012). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 5.3 Economic Impacts of OIA Payments Using Input-Output Analysis To determine the direct impacts of OIA payments in the USVI, the payments from Table 5-1 were each applied to a corresponding IMPLAN sector code. Direct impacts were estimated using output and employee compensation-to-employee ratios from the IMPLAN modeling system. The direct employment, employee compensation, and output inputs are reported in Table 5-6. We estimated that the $269 million spent in USVI directly supported 7,248 jobs and $266 million in employee compensation. These direct impacts were multiplied by Type II Social Accounting Matrix multipliers to estimate the total impact of OIA payments on the region’s economy. The relevant multipliers that were estimated for this analysis are reported in Table 5-7. Note the OIA payments from 2013 are treated as the output inputs. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 5-8 Table 5-6. USVI: Direct Economic Impacts of OIA Payments Using I/O Analysis (FY 2013) Industry IMPLAN Code FY2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employmen t Impact (#) Direct Employee Compensatio n Impact ($’000, 2013$) State and Local Government, non- Education 437 265,208 $36,755 $36,755 7,216 265,208 State and Local Government, Education 438 466 $26,854 $26,854 17 466 Maintenance and repair construction of nonresidential structures 39 2,896 $192,706 $47,012 15 707 Total 268,570 7,248 266,380 Source: RTI estimates based IMPLAN (2013). Table 5-7. USVI: Selected IMPLAN Multipliers by Industry Industry Description IMPLAN Code Total Employment Impact Multiplier Total Employee Compensation Multiplier Total Output Impact Multiplie r State and Local Government, non- Education 437 1.11 1.08 1.54 State and Local Government, Education 438 1.08 1.08 1.54 Maintenance and repair construction of nonresidential structures 39 1.27 1.17 1.33 Source: RTI estimates based IMPLAN (2013). By multiplying the direct impacts of each sector with their corresponding Type II SAM Multiplier, we can compute the total economic impacts associated with OIA payments to USVI. The total economic impacts of this activity in USVI support 8,012 employees, $287 million in employee compensation, and $412 million in GDP. These results are displayed in Table 5-8. Section 5 — USVI 5-9 Table 5-8. USVI: Total Economic Impacts Using I/O Analysis (FY 2013) Industry Description IMPLAN Code Total Employment Impact (# of workers) Total Employee Compensatio n Impact ($’000; 2013$) Total Output Impact ($’000; 2013$) State and Local Government, non- Education 437 7,975 285,174 407,782 State and Local Government, Education 438 19 501 717 Maintenance and repair construction of nonresidential structures 39 19 828 3,851 Total 8,012 $286,503 $412,350 Source: RTI estimates based IMPLAN (2013). The significance of OIA’s economic contributions can be better understood when viewed in relation to the USVI economy as a whole, which is summarized in Table 5-9. As this table illustrates, the 8,012 jobs directly and indirectly supported by OIA payments represent 21% of USVI’s total employment. Similarly, $286 million of employee compensation associated with these employees accounts for approximately 23% of total employee compensation inside the region, and the $412 million of GDP associated with these employees represents 9% of total GDP produced by the insular area. Table 5-9. USVI: Estimated Impact Relative to National Economy (FY 2013) Total Economic Impact for FY2012 OIA Payments National Data Impact as Percentage of Total Economy Employment (#) 8,012 38,454 21% Employee compensation ($’000; 2013$) 286,503 1,221,177 23% GDP ($’000; 2013$) 412,350 4,511,271 9% Source: RTI estimates based IMPLAN (2013). 6-1 6. FEDERATED STATES OF MICRONESIA (FSM) 6.1 FY 2013 OIA Payments Summary FSM faces severe challenges in implementing effective government, education, and health care systems and relies heavily on OIA support. FSM’s economy is based in large part on the fishing industry, which earns income through licensing fees charged to foreign tuna fishing vessels for fishing rights in FSM’s exclusive economic zone. The FSM had an average GDP per capita of about $3,218 in 2012. According to PITI-VITI (2013a), FSM’s economy, after several years of loss in the early 2000s, experienced positive real GDP growth between FY2009 and FY2011. This recent growth has been spurred by investments to improve infrastructure largely from a FAA stimulus In FY2012, there was growth in the fisheries sector but the FAA stimulus came to a close and economic growth was flat. OIA payments to FSM in 2013 totaled $108.6 million. A detailed breakdown of these payments is presented in Table 6-1. The largest block of OIA payments to FSM, totaling $106.7 million, came through the Compact of Free Association. The Compact provides essential funding for operating FSM’s education, health care, and government systems and improves the insular area’s infrastructure. Payments associated with Assistance to Territories totaled $1.7 million. General technical assistance provided direct grants, judicial training, the Close Up Foundation, the Prior Service Benefits Program, and the PITI-VITI. Other Assistance to Territories programs included items such as the Coral Reef Initiative. Table 6-1. FSM: OIA Payments (FY 2013) Appropriation Spending ($’000, 2013$) Impact Treatment Compact of Free Association Judicial training U.S. territories 174 Government Education 28,035 Education Health 20,693 Health care Capacity building 2,946 Government Private sector 2,373 Government Environment 1,718 Government Enhanced reporting and accountability 1,481 Government Infrastructure 24,438 Construction Balance 24,979 Government Total, Compact of Free Association 106,837 (continued) Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 6-2 Table 6-1. FSM: OIA Payments (FY 2013) (continued) Appropriation Spending ($’000, 2013$) Impact Treatment Assistance to Territories General technical assistance—Direct grants 223 Government General technical assistance—USDA Grad School PITI-VITI 154 Education General technical assistance—Close Up Foundation 444 Education General technical assistance—Prior Service Benefits Program 53 Private General technical assistance—Judicial training 223 Government Subtotal, General Technical Assistance 1,186 Office of Insular Affairs 51 Government Maintenance assistance 261 Government Coral Reef Initiative 250 Government Subtotal, Other 562 Total, Assistance to Territories 1,748 Total Spending Inside FSM 108,584 Source: OIA, 2013b. 6.2 Direct Economic Impacts Direct economic impacts of OIA payments were assigned to five economic sectors— education, construction, government, health care, and an assortment of private industries through the spending of Prior Service Benefits recipients. To calculate the employment and employee compensation impacts associated with this spending, as described in the methodology, we used the following output and employee compensation-to-employee ratios:1
Education: Based on employment and gross wage data provided in Fiscal Year 2012 Economic Review for FSM (PITI-VITI, 2013a), the employee compensation-to- employee ratio for private-sector workers in the education sector was $5,254 in 2012. Because information was not available for output associated with the education industry, the output-to-employee ratio for American Samoa was used ($50,454). American Samoa was chosen to be the best point of comparison in this context because economic metrics, such as GDP per capita, were more similar to FSM than for any other area for which output-to-employee data were available. However, it should be noted that to the extent this proxy overestimates the true output-to-employee ratio for FSM the direct impacts of OIA spending will be underestimated because more jobs will be supported by each dollar of OIA spending.
Construction: Based on employment and gross wage data provided in Fiscal Year 2012 Economic Review for FSM (PITI-VITI, 2013a), the employee compensation-to- 1 All adjustments for inflation were made using the U.S. Consumer Price Index for All Urban Consumers (BLS, 2013). Section 6 — FSM 6-3 employee ratio for private-sector workers in the construction sector was $6,757 in 2012. Because information was not available for output associated with the construction industry, the output-to-employee ratio for American Samoa was used ($58,908).
Government: According to the Fiscal Year 2012 Economic Review for FSM (PITI-VITI 2013a), the government of Micronesia received approximately $215.2 million in revenue and employed approximately 6,303 individuals in 2012. Adjusting for inflation, this implies an output-to-employee ratio of $34,645. Similarly, according to information presented in the same report, these workers received approximately $22.1 million in employee compensation in 2012. This implies an employee compensation-to-employee ratio of $3,558.
Health care: Based on employment and gross wage data provided in Fiscal Year 2012 Economic Review for FSM (PITI-VITI, 2013a), the employee compensation-to- employee ratio for private-sector workers in the health care sector was $9,922 in 2012. Because information was not available for output associated with the health care industry, the output-to-employee ratio for American Samoa was used ($42,071).
Private: Based on employment and gross wage data provided in Fiscal Year 2012 Economic Review for FSM (PITI-VITI, 2013a), the average wage for a private-sector worker was $5,196 in 2012. Because information was not available for output associated with the private sector, the output-to-employee ratio for American Samoa was used ($127,685). Dividing the payments directed toward each sector by the output-to-employee ratio yields the direct employment impacts, while multiplying the direct employment impacts by the employee compensation-to-employee ratio yields the direct employee compensation impacts. Direct impacts are reported in Table 6-2. Table 6-2. FSM: Estimated Direct Economic Impacts Using EBA (FY 2013) Industry FY 2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) Education 28,501 50,454 5,254 565 2,968 Construction 24,438 58,908 6,757 415 2,803 Government 34,510 34,645 3,558 996 3,544 Health care 20,693 42,071 9,922 492 4,880 Private 444 127,685 5,196 3 18 Total 108,584 2,471 14,213 Sources: RTI estimates based on PITI-VITI (2013a), Census (2009), and OIA (2013b). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 6-4 6.3 Employment and Employee Compensation Base Multipliers The employment and employee compensation multipliers were developed using 2012 employment and gross wage data from the Micronesia Fiscal Year 2012 Economic Review performed by researchers at PITI-VITI (Table 6-3). The economic base of FSM is agriculture, fishing, manufacturing, and federal government activities. Industries supported by tourism can also be considered part of the economic base. Ideally, data would be available on the number of employees who are supported by tourism. However, because these data were unavailable, we assumed that the entire accommodation and food services industries are supported by tourism and are, therefore, part of the economic base.2 This is likely a conservative approach because, to the extent that this approximation overrepresents the portion of the economy supported by tourism, employment and employee compensation multipliers will be reduced. In addition to these industries, a portion of FSM’s territorial government is considered part of the economic base. Specifically, because over half of FSM’s government revenue comes from external sources, approximately 58% of public administration was also included in the base employment for the purpose of calculating base multipliers (PITI-VITI, 2013d). Based on these assumptions and the data in Table 6-3, we calculated the following multipliers:
Base employment multiplier: Base employment was calculated to include 4,792 employees out of a total of 15,281. Dividing total employment by base employment yields a multiplier of 3.19, meaning that for every base employment position supported by OIA funding, an estimated 2.19 additional jobs are formed elsewhere in the economy.
Employee compensation multiplier: Employee compensation associated with base employment was estimated to be $17.5 million. Dividing total employee compensation by base employee compensation yields a base multiplier of 3.96, meaning that every dollar of employee compensation supported by the FY 2013 spending will create an additional $2.96 in employee compensation. Multiplying the direct employment and employee compensation impacts in Table 6-2 by these multipliers yields a total employment impact of 7,880 employees and $56.3 million of employee compensation. 6.4 GDP Base Multipliers As part of its strategic goals, OIA has funded the PITI-VITI to estimate more detailed and accurate economic indicators for the FAS. In August 2013, PITI-VITI released updated FY 2012 economic reports for the Freely Associated States, which included estimates of GDP by 2 A similar approach for creating a proxy for measuring the role of tourism in insular area economies was used in GAO (2006). Section 6 — FSM 6-5 Table 6-3. FSM: Employment and Employee Compensation by Industry (2012 estimates) Industry Employment (#) Employee Compensation ($’000, 2013$) Economic Base Industries Agriculture, hunting, and forestry 14 45 Mining and quarrying 0 0 Fishing 242 1,269 Extra-territorial organizations 50 0 Government (Public administration)a 6,303 22,101 Manufacturing 124 494 Tourism—Hotels and restaurants 681 2,820 Noneconomic Base Industries Construction 1,391 9,263 Education 866 4,392 Electricity, gas, and water supply 297 1,082 Financial intermediation 236 2,638 Health and social work 113 1,103 Other services 483 2,410 Private households with employed persons 7 24 Real estate, renting, and business activities 363 2,715 Transport, storage, and communications 971 5,649 Wholesale and retail trade and repairs 3,141 13,427 Total 15,281 69,431 a Because 58% of FSM’s budget comes from external sources, it was assumed that only 58% of the employment and employee compensation associated with public administration was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Note: A significant portion of employment across all sectors was accounted for by public enterprises. However, employee compensation statistics were only provided for private-sector workers. Therefore, to estimate total employee compensation for all workers across industries, we assumed that the employee compensation-to-employee ratio was the same for public-sector workers and private-sector workers in each industry. Source: RTI estimates based on PITI-VITI (2013a). industry. Using this data we were able to estimate GDP multipliers, making for a more detailed analysis of the GDP impacts of OIA payments. Direct GDP impacts are the sum of OIA payments to insular governments plus the impacts of OIA payments on private sectors. A GDP-to-employee ratio was used to determine the direct GDP impacts of OIA payments in the private sector. It is estimated that FSM’s GDP Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 6-6 was $330.9 million in 2012 (PITI-VITI, 2013a). Dividing this by the total number of employees estimated to be working in FSM (15,281) implies a GDP-to-employee ratio of $21,657. Multiplying this ratio by the direct employment impact in the private sector (1,475 employees) yields a direct private-sector GDP impact of $31.9 million. This private-sector impact is then added to the $34.5 million of OIA payments spent in the public sector to produce an estimate of approximately $66.5 million in direct GDP impacts. To determine the indirect and induced effects of OIA payments on GDP, we used the recent PITI-VITI data (Table 6-4) on GDP by industry to calculate a base multiplier using the same methodology as the employment and employee compensation base multipliers. It was assumed that the agriculture, hunting, and forestry; mining and quarrying; fishing; hotels and restaurants; and manufacturing sectors were economic base sectors, along with 58% of the territorial government. The remaining territorial government and other private sectors were included in the noneconomic base industries. Table 6-4. FSM: GDP by Industry (2012) Industry GDP (in millions of 2013$) Economic Base Industries Agriculture, hunting, and forestry 44.9 Mining and quarrying 0.0 Fishing 47.5 Government (Public administration)a 32.6 Manufacturing 1.3 Tourism—Hotels and restaurants 5.5 Noneconomic Base Industries Construction 21.1 Education 34.3 Electricity, gas, and water supply 5.7 Financial intermediation 6.7 Health and social work 14.8 Other services 3.9 Real estate, renting, and business activities 35.5 Transport, storage, and communications 18.2 (continued) Section 6 — FSM 6-7 Table 6-4. FSM: GDP by Industry (2012) (continued) Industry GDP (in millions of 2013$) Wholesale and retail trade and repairs 37.5 less intermediate FISIM -4.66 Total at Basic Prices 304.8 Taxes on products less subsidies 26.1 Total at Purchasers’ Prices 330.9 a Because 58% of FSM’s budget comes from external sources, it was assumed that only 58% of the employment and employee compensation associated with public administration was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Sources: RTI estimates based on PITI-VITI (2013a). Based on these assumptions and the data in Table 6-4, base GDP was calculated to be $118.2 million. Dividing total GDP by base GDP yields a multiplier of 2.80, meaning that for every dollar of base GDP supported by OIA funding, an estimated 1.80 of additional GDP dollars are formed elsewhere in the economy. By multiplying the direct GDP impacts of OIA payments by the GDP base multiplier, we estimate the total impact on GDP is $186 million. 6.5 EBA Economic Impact Estimate In summary, the $108.6 million spent by OIA inside FSM directly supports 2,471 jobs, $14.2 million in employee compensation, and $66.5 million in GDP. Accounting for secondary effects, we estimate that OIA spending supports a total of 7,880 jobs, $56.3 million in employee compensation, and $186 million in GDP. This information is summarized in Table 6-5. Table 6-5. FSM: Total Estimated Economic Impact Using EBA (FY 2013) Direct Economic Impact Indirect/Induced Economic Impact Total Economic Impact Employment (#) 2,471 5,409 7,880 Employee compensation ($’000; 2013$) 14,213 42,066 56,279 GDP ($’000; 2013$) 66,455 119,531 185,986 Sources: RTI estimates based on OIA (2013b), PITI-VITI (2013a, 2013d), and Census (2009)). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 6-8 The significance of OIA’s economic contributions can be better understood when viewed in relation to the FSM economy as a whole, which is summarized in Table 6-6. The 7,880 jobs directly and indirectly supported by OIA payments represent 52% of FSM’s total employment in 2012. Similarly, $56.3 million of employee compensation associated with these employees accounts for approximately 81% of total employee compensation inside the region, and the $186 million of GDP associated with these employees represents 56% of the $331 million of total GDP produced by the region. Table 6-6. FSM: Estimated Impact Relative to National Economy Using EBA (FY2013) Total Economic Impact for FY 2013, OIA Payments National Data Impact as Percentage of Total Economy Employment (#) 7,880 15,281 52% Employee compensation ($’000, 2013$) 56,279 69,431 81% GDP ($’000, 2013$) 185,986 330,938 56% Sources: RTI estimates based on OIA (2013b), PITI-VITI (2013a, 2013d), and Census (2009). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 7-1 7. REPUBLIC OF THE MARSHALL ISLANDS (RMI) 7.1 FY 2013 OIA Payments Summary RMI faces severe challenges in implementing effective government, education, and health care systems and relies heavily on OIA support. RMI has an average GDP per capita of only about $3,292 in 2012. RMI’s economy is based on fishing, subsistence farming, and production of copra, its largest export. The public sector is also a significant factor in RMI’s economy. RMI’s economy has grown each year since FY2010, including 3.2% growth in FY2012 (PITI-VITI, 2013b). OIA payments to RMI in 2013 totaled $70.9 million. A detailed breakdown of these payments is presented in Table 7-1. The largest block of OIA payments, totaling $68.7 million in spending inside RMI, came through the Compact of Free Association. The Compact provides essential funding for operating RMI’s education, government, and health care systems; improving infrastructure; and protecting the environment. In 2012, the Compact and Ebeye Special Needs contributed nearly 75% of the funding available for education in RMI and 37% of the budget for health care (OIA, 2013b). Assistance to Territories payments totaled $2.2 million. General technical assistance provided direct grants, judicial training, the 4 Atoll Health Care Program (which provides health care services, including a full-time primary care physician for each atoll, for Enewetak, Bikini, Rongelap, and Utrik), the Close Up Foundation, the Prior Service Benefits Program, and PITI-VITI. Other Assistance to Territories programs included items such as Maintenance Assistance. Table 7-1. RMI: OIA Payments (FY 2013) Appropriation Spending ($’000, 2013$) Impact Treatment Compact of Free Association Enewetak 499 69% government, 31% transfer Judicial training U.S. territories 174 Government Education 11,599 Education Health 6,694 Health care Infrastructure 9,407 Construction Environment 325 Government Ebeye Special Needs—Education 1,758 Education Ebeye Special Needs—Health care 231 Health care Kwajalein Environmental impact 13,307 Government RMI Trust Fund 17,357 Government Kwajalein Landowner Payments 458 Private (continued) Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 7-2 Table 7-1. RMI: OIA Payments (FY 2013) (continued) Appropriation Spending ($’000, 2013$) Impact Treatment Disaster Assistance Emergency Fund 500 Government RMI Single Audit (FY12) 1,275 Government Kwajalein Impact Fund 3,351 Government Balance 325 Government Total, Compact of Free Association 68,763 Assistance to Territories General technical assistance—Direct grants 228 Government General technical assistance—USDA Grad School PITI-VITI 313 Education General technical assistance—Close Up Foundation 154 Education General technical assistance—Prior Service Benefits Program 146 Private General technical assistance—Judicial training 53 Government General technical assistance—4 Atoll Health Care Program 990 Health care Subtotal, General Technical Assistance 1,884 Maintenance assistance 179 Government Office of Insular Affairs 101 Government Subtotal, Other 280 Total, Assistance to Territories 2,164 Total Payments 70,926 Spending Outside RMI 155 Total Spending Inside RMI 70,772 Source: RTI estimates based on OIA (2013b). For the Enewetak assistance program, 31% of funding provides imported food for the citizens of this atoll and, thus, was not included in the analysis because this assistance is not being spent in the insular area. Therefore, the total amount of OIA payments spent within RMI is about $70.8 million. 7.2 Economic Impacts of OIA Payments Using Economic Base Analysis Direct economic impacts of OIA payments were assigned to five economic sectors— education, construction, government, health care, and an assortment of private industries through the spending of Prior Service Benefits recipients. To calculate the employment and employee compensation impacts associated with this spending, as described in the Section 7 — RMI 7-3 methodology, we used the following output and employee compensation-to-employee ratios:1
Education: Based on FY 2012 employment and wage cost data provided in the Fiscal Year 2012 Economic Review for RMI (released in August 2013), the employee compensation-to-employee ratio for private-sector workers in the education sector was $12,412 in 2011 (PITI-VITI, 2013b). Because information was not available for output associated with the education industry, the output-to-employee ratio for American Samoa was used ($50,454). American Samoa was chosen to be the best point of comparison in this context because economic metrics, such as GDP per capita, were more similar to RMI than for any other area for which output-to- employee data were available. However, it should be noted that to the extent this proxy overestimates the true output-to-employee ratio for RMI the direct impacts of OIA spending will be underestimated because more jobs will be supported by each dollar of OIA spending.
Construction: Based on employment and wage cost data provided in the Fiscal Year 2012 Economic Review for RMI, the employee compensation-to-employee ratio for private-sector workers in the construction sector was estimated to be $7,749 in 2012 (PITI-VITI, 2013b). Because information was not available for output associated with the construction industry, the output-to-employee ratio for American Samoa was used ($58,908).
Government: Based on data provided in the Fiscal Year 2012 Economic Review for RMI, the RMI government received approximately $94.8 million in revenue and employed approximately 3,559individuals in 2012 (PITI-VITI, 2013b). Adjusting for inflation, this implies an output-to-employee ratio of $27,025 in 2013 dollars. Similarly, 3,559 government workers received $41.2 million in employee compensation in 2012. This implies an employee compensation-to-employee ratio of $11,738.
Health care: Based on employment and wage cost data provided in the Fiscal Year 2012 Economic Review for RMI, the employee compensation-to-employee ratio for private-sector workers in the health care sector was estimated to be $9,222 in 2013 dollars (PITI-VITI, 2013b). Because information was not available for output associated with the health care industry, the output-to-employee ratio for American Samoa was used ($42,071). American Samoa was chosen to be the best point of comparison in this context because economic metrics, such as GDP per capita, were more similar to RMI than for any other area for which data were available.
Private: According to the Fiscal Year 2012 Economic Review for RMI, the average wage for a private worker in RMI was estimated to be $5,246 in 2012 (PITI-VITI, 2013b). Because information was not available for output associated with the private industry, the output-to-employee ratio for American Samoa was used ($127,685). American Samoa was chosen to be the best point of comparison in this context because economic metrics, such as GDP per capita, were more similar to RMI than for any other area for which data were available. 1 All adjustments for inflation were made using the U.S. Consumer Price Index for All Urban Consumers (BLS, 2013). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 7-4 Dividing the payments directed toward each sector by the output-to-employee ratio yields the direct employment impacts, while multiplying the direct employment impacts by the employee compensation-to-employee ratio yields the direct employee compensation impacts. Direct impacts are reported in Table 7-2. Table 7-2. RMI: Estimated Direct Economic Impacts Using EBA (FY 2013) Industry FY 2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) Education 13,894 50,454 12,412 275 3,418 Construction 9,407 58,908 7,749 160 1,237 Government 20,526 27,025 11,738 760 8,916 Health care 9,441 42,071 9,222 224 2,070 Private 17,502 127,685 5,246 137 719 Total 70,772 1,556 16,360 Sources: RTI estimates based on OIA (2013b), PITI-VITI (2013b), and Census (2009). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). Employment and Employee Compensation Base Multipliers. The employment and employee compensation multipliers were developed for 2012 using data from the RMI Fiscal Year 2012 Economic Review performed by researchers at PITI-VITI (Table 7-3). Table 7-3. RMI: Employment and Employee Compensation by Industry (2012 estimates) Industry Employment (#) Employee Compensation ($’000, 2013$) Economic Base Industries Agriculture, hunting, and forestry 10 37 Fishing 1,173 3,658 Extra-territorial organizations 930 16,122 Government (Public administration)a 3,559 41,168 Manufacturing 94 655 Tourism—Hotels and restaurants 264 1,476 Noneconomic Base Industries Community, social, and personal service activities 218 1,712 Construction 449 3,360 (continued) Section 7 — RMI 7-5 Table 7-3. RMI: Employment and Employee Compensation by Industry (2012 estimates) (continued) Industry Employment (#) Employee Compensation ($’000, 2013$) Education 546 6,548 Electricity, gas, and water supply 317 4,455 Financial intermediation 230 3,794 Health and social work 244 2,172 Private households with employed person 7 12 Real estate, renting, and business activities 224 1,699 Transport, storage, and communications 636 6,127 Wholesale and retail trade 1,718 9,213 Total 10,618 102,208 a Because 60% of RMI’s budget comes from external sources, we assumed that only 60% of the employment and employee compensation associated with public administration was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Note: A significant portion of employment across all sectors was accounted for by public enterprises. However, employee compensation statistics were provided only for private-sector workers. Therefore, to estimate total employee compensation for all workers across industries, we assumed that the employee compensation-to-employee ratio was the same for public-sector workers and private-sector workers in each industry. Source: RTI estimates based on PITI-VITI (2013b). The economic base of RMI is agriculture, hunting, forestry, manufacturing, and federal government activities. Industries supported by tourism can also be considered part of the economic base. Ideally, data would be available on the number of employees supported by tourism. However, because these data were unavailable, we assumed that the entire accommodation and food services industries are supported by tourism and are, therefore, part of the economic base.2 This is likely a conservative approach because, to the extent that this approximation overrepresents the portion of the economy supported by tourism, employment and employee compensation multipliers will be reduced. In addition to these industries, a portion of RMI’s territorial government is considered part of the economic base. Specifically, because approximately 60% of RMI’s government revenue comes from external sources, 60% of public administration was also included in the base employment for the purpose of calculating base multipliers (PITI-VITI, 2013d). Based on these assumptions and the data in Table 7-3, we calculated the following multipliers: 2 A similar approach for creating a proxy for measuring the role of tourism in insular area economies was used in GAO (2006). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 7-6
Base employment multiplier: Base employment was calculated to include 4,592 employees out of a total of 10,618. Dividing total employment by base employment yields a multiplier of 2.31, meaning that for every base employment position supported by OIA funding, an estimated 1.31 additional jobs are formed elsewhere in the economy.
Employee compensation multiplier: Employee compensation associated with base employment was estimated to be $46.5 million. Dividing total employee compensation by base employee compensation yields a base multiplier of 2.20, meaning that every dollar of employee compensation supported by the FY 2013 spending will create an additional $1.20 in employee compensation. Multiplying the direct employment and employee compensation impacts in Table 7-2 by these multipliers yields a total employment impact of 3,598 employees and $36 million of employee compensation. 7.3 GDP Base Multipliers Direct GDP impacts are the sum of OIA payments to insular governments plus the impacts of OIA payments on private sectors. A GDP-to-employee ratio was used to determine the direct GDP impacts of OIA payments in the private sector. It is estimated that RMI’s GDP was $176 million in 2012 (PITI-VITI, 2013b). Dividing this by the total number of employees estimated to be working in RMI (10,618) implies a GDP-to-employee ratio of $16,480. Multiplying this ratio by the direct employment impact in the private sector (797 employees) yields a direct private-sector GDP impact of $13.1 million. This private-sector impact is then added to the $20.5 million of OIA payments spent in the public sector to produce an estimate of approximately $33.7 million in direct GDP impacts. Total GDP impacts are determined by multiplying the direct GDP impacts by a GDP base multiplier. Because of RMI’s high percentage of OIA payments compared with GDP (a ratio of 0.41, the highest of the insular areas), small size of economy, and small base sector (in terms of GDP), using a GDP base multiplier from the PITI-VITI FY 2012 Economic Report would create a high base GDP multiplier and potentially overestimate the impacts of OIA payments on GDP. Therefore, we used the smaller value employment base multiplier of 2.20 as a proxy GDP base multiplier. Using this multiplier created a total GDP impact that was consistent with previous analyses and the other FAS. By multiplying the direct GDP impacts of OIA payments by the proxy GDP base multiplier, we estimate the total impact on GDP is $77.8 million. 7.4 EBA Economic Impact Estimate In summary, the $70.8 million spent by OIA inside RMI directly supports 1,556 jobs, $16.4 million in employee compensation, and $33.7 million in GDP. Accounting for secondary effects, we estimate that OIA spending supports a total of 3,598 jobs, $36 million in Section 7 — RMI 7-7 employee compensation, and $77.8 million in GDP. This information is summarized in Table 7-4. Table 7-4. RMI: Total Estimated Economic Impact Using EBA (FY 2013) Direct Economic Impact Indirect/Induced Economic Impact Total Economic Impact Employment (#) 1,556 2,042 3,598 Employee compensation ($’000, 2013$) 16,360 19,611 35,971 GDP ($’000, 2013$) 33,654 44,165 77,819 Sources: RTI estimates based on OIA (2013b), PITI-VITI (2013b, 2013d), and Census (2009). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). The significance of OIA’s economic contributions can be better understood when viewed in relation to the RMI economy as a whole, which is summarized in Table 7-5. As this table illustrates, the 3,598 jobs directly and indirectly supported by OIA payments represent 34% of RMI’s total employment in 2012. Similarly, $36 million of employee compensation associated with these employees accounts for approximately 35% of total employee compensation inside the region, and the $77.8 million of GDP associated with these employees represents 44% of total GDP produced by the insular area. Table 7-5. RMI: Estimated Impacts Relative to National Economy Using EBA (FY2013) Total Economic Impact for FY 2013 OIA Payments National Data Impact as Percentage of Total Economy Employment (#) 3,598 10,618 34% Employee compensation ($’000, 2013$) 35,971 102,208 35% GDP ($’000, 2013$) 77,819 174,985 44% Sources: RTI estimates based on OIA (2013b), PITI-VITI (2013b, 2013d), and Census (2009). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 8-1 8. REPUBLIC OF PALAU 8.1 FY 2013 OIA Payments Summary Like the other insular areas, Palau faces a number of obstacles to economic development, including limited land and resources, a small population, limited local technical expertise, a narrow economic base, and vulnerability to natural disasters. The average GDP per capita for Palau in 2012 was $13,278 (2013$) as compared with the GDP per capita of the United States, which was $51,749 (World Bank, 2013a). Through their funding and support, OIA strives to foster economic development, promote sound management, and improve quality of life in Palau. In September 2010, the governments of the United States and Palau signed a new 15-year compact agreement that offers $250 million in assistance through 2024. The assistance will fund direct economic assistance and infrastructural projects, and the amount of funding will decline each year to promote Palau’s self-sufficiency (OIA, 2013b). These payments, which are dispersed through OIA, were enacted in FY 2012. OIA payments made to Palau in 2013 totaled $14.2 million and were primarily dedicated to the government sector with some additional support for education, construction, and the private sector. A detailed breakdown of OIA payments to Palau is presented in Table 8-1. The largest block of OIA payments to Palau, totaling $13.5 million in spending inside the island, came through the Compact of Free Association. This includes funding for infrastructure improvements, economic assistance, and government fiscal support (OIA, 2012a). Under the new compact agreement, the OIA also funds a subsidy for the U.S. Postal Service to provide mail service to the insular area; because this payment is a direct transfer, this value was not included in the analysis of the direct impacts of OIA’s assistance. Table 8-1. Palau: Grant Spending by Appropriation (FY 2013) Appropriation Spending ($’000, 2013$) Impact Treatment Compact of Free Association Federal Services Assistance 308 Transfer Program Grant Assistance 2,000 Government Infrastructure projects 8,000 Construction Economic assistance 1,147 Government Total, Compact of Free Association 13,455 Assistance to Territories General technical assistance—USDA Grad School PITI-VITI 313 Education General technical assistance—Close Up Foundation 154 Education (continued) Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 8-2 Table 8-1. Palau: Grant Spending by Appropriation (FY 2013) (continued) Appropriation Spending ($’000, 2013$) Impact Treatment General technical assistance—Prior Service Benefits Program 192 Private General technical assistance—Judicial training 53 Government Subtotal, General Technical Assistance 711 Total, Assistance to Territories 711 Total Payments 14,166 Spending Outside RMI 308 Total Spending Inside RMI 13,858 Source: RTI estimates based on OIA (2013b). Assistance to Territories payments totaled $0.7 million. General technical assistance provided direct grants, judicial training, the Close Up Foundation, the Prior Service Benefits Program, and the PITI-VITI. Therefore, the total amount of OIA payments spent within Palau is about $13.9 million. 8.2 Direct Economic Impacts of Payments Direct economic impacts of OIA payments were assigned to four economic sectors— education, construction, government, and an assortment of private industries through the spending of Prior Service Benefits recipients. To calculate the employment and employee compensation impacts associated with this spending, as described in the methodology, we used the following output and employee compensation-to-employee ratios:1
Education: Based on data provided in the Fiscal Year 2012 Economic Review for Palau, the employee compensation-to-employee ratio in the education sector in 2012 was $10,939. Adjusting for inflation, this implies an employee compensation-to- employee ratio of $11,836 in 2013 dollars (PITI-VITI, 2013c). Because information was not available for output associated with the education sector, the output-per- employee ratio for American Samoa was used ($50,454). American Samoa was chosen to be the best point of comparison in this context because economic metrics, such as GDP per capita, were more similar to Palau than for any other area for which data were available. However, it should be noted that to the extent this proxy overestimates the true output-to-employee ratio for Palau the direct impacts of OIA spending will be underestimated because more jobs would be supported by each dollar of OIA spending.
Construction: According to the PITI-VITI (2013c) economic review, in 2012 534 workers were located in the construction sector who received $4.2 million in employee compensation in 2012. This implies an average employee compensation- to-employee ratio of $8,555 in 2013 dollars. Because information was not available 1 All adjustments for inflation were made using the U.S. Consumer Price Index for All Urban Consumers (BLS, 2013). Section 8 — Republic of Palau 8-3 for output associated with the construction sector, the output-to-employee ratio for American Samoa was used ($58,908).
Government: Based on data reports by the Asian Development Bank, the government of Palau received $94.2 million in revenue in 2012 and employed approximately 2,706 people that year (ADB, 2012; PITI-VITI, 2013c). This implies the ratio of government revenue to government employees was $34,812 in 2012, or $35,321 in 2013 dollars. Similarly, based on 2012 average wage estimates from the PITI-VITI (2013c) 2012 Economic Review, the employee compensation-to-employee ratio for government workers was estimated to be $14,341 in 2008, or $15,517 in 2013 dollars.
Private: Based on quarterly employment and gross wage/salary reports from PITI- VITI, 6,849workers were located in the private sector who received $59.4 million in employee compensation in 2012. This implies an average employee compensation- to-employee ratio of $9,376 in 2013 dollars. Because information was not available for output associated with the private sector, the output-to-employee ratio for American Samoa was used ($127,685). Dividing the payments directed toward each sector by the output-to-employee ratio yields the direct employment impacts, while multiplying the direct employment impacts by the employee compensation-to-employee ratio yields the direct employee compensation impacts. Direct impacts are reported in Table 8-2. Table 8-2. Palau: Estimated Direct Economic Impacts (FY 2013) Industry FY 2013 Payments ($’000, 2013$) Output-to- Employee Ratio ($/employee) Employee Compensation- to-Employee Ratio ($/employee) Direct Employment Impact (#) Direct Employee Compensation Impact ($’000, 2013$) Education 466 50,454 11,836 9 109 Construction 10,000 58,908 8,555 170 1,452 Government 3,200 35,321 15,517 91 1,406 Private 192 127,685 9,376 1 14 Total 13,858 271 2,982 Sources: RTI estimates based on OIA (2013b), ADB (2013), Census (2009), and PITI-VITI (2013c). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 8.3 Employment and Employee Compensation Base Multipliers The employment and employee compensation multipliers were developed using data from the PITI-VITI 2012 Economic Review of Palau (Table 8-3). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 8-4 Table 8-3. Palau: Estimated Employment and Employee Compensation by Industry (2012) Industry Employment (#) Employee Compensation ($’000, 2013$) Economic Base Industries Agriculture, hunting, and forestry 82 320 Fishing 91 493 Extra-territorial organizations 26 377 Government (Public administration)a 2,706 39,375 Mining and quarrying 99 929 Manufacturing 147 1,071 Tourism—Hotels and restaurants 1,553 13,025 Noneconomic Base Industries Construction 534 4,284 Education 495 5,494 Financial intermediation 104 2,254 Health and social work 52 729 Other service activities 296 1,926 Private households with employed person 622 1,210 Real estate, renting, and business activities 138 1,527 Transport, storage, and communications 618 6,221 Wholesale and retail trade; repair of motorcycles; personal and household goods 1,381 11,282 Total 8,944 90,516 a Note that because 47% of Palau’s budget comes from external sources, it was assumed that only 47% of the employment and employee compensation associated with public administration was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Source: RTI estimates based on PITI-VITI (2013c). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). The economic base of Palau is agriculture, hunting, forestry, manufacturing, and federal government activities. Industries supported by tourism can also be considered part of the economic base. Ideally, data would be available on measures of the number of employees who are supported by tourism. However, because these data were unavailable, we assumed that the entire accommodation and food services industries are supported by tourism and are, therefore, part of the economic base.2 This is likely a conservative approach because, 2 A similar approach for creating a proxy for measuring the role of tourism in insular area economies was used in GAO (2006). Section 8 — Republic of Palau 8-5 to the extent that this approximation overrepresents the portion of the economy supported by tourism, employment and employee compensation multipliers will be reduced. In addition to these industries, a portion of Palau’s territorial government is considered part of the economic base. Because approximately 47% of Palau’s government revenue comes from external sources, 47% of public administration was included in the base employment for the purpose of calculating base multipliers (PITI-VITI, 2013c). Based on these assumptions and the data in Table 8-3, we calculated the following multipliers:
Base employment multiplier: Base employment was calculated to include 3,267 employees out of a total of 8,944. Dividing total employment by base employment yields a multiplier of 2.74, meaning that for every base employment position supported by OIA spending, an estimated 1.74 additional jobs are formed elsewhere in the economy.
Employee compensation multiplier: Employee compensation associated with base employment was estimated to be $34.7 million. Dividing total employee compensation by base employee compensation yields a base multiplier of 2.61, meaning that every dollar of employee compensation supported by the FY 2013 spending will create an additional $1.61 in employee compensation. Multiplying the direct employment and employee compensation impacts in Table 8-2 by these multipliers yields a total employment impact of 763 employees and $7.6 million of employee compensation. 8.4 GDP Base Multipliers As part of its strategic goals, OIA has funded the PITI-VITI to estimate more detailed and accurate economic indicators for the FAS. In June 2013, PITI-VITI released updated FY 2012 economic reports for the Freely Associated States. With this data, we were able to better estimate GDP multipliers, making for a more detailed analysis of the GDP impacts of OIA payments. Direct GDP impacts are the sum of OIA payments to insular governments plus the impacts of OIA payments on private sectors. A GDP-to-employee ratio was used to determine the direct GDP impacts of OIA payments in the private sector. It is estimated that Palau’s GDP was $232 million in 2012 (PITI-VITI, 2013c). Dividing this by the total number of employees estimated to be working in Palau (8,944) implies a GDP-to-employee ratio of $25,913. Multiplying this ratio by the direct employment impact in the private sector (180 employees) yields a direct private-sector GDP impact of $4.7 million. This private-sector impact is then added to the $3.2 million of OIA payments spent in the public sector to produce an estimate of approximately $7.9 million in direct GDP impacts. To determine the indirect and induced effects of OIA payments on GDP, we estimated the breakdown of GDP by industry using the proportion of GDP by industry from the PITI-VITI Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 8-6 (2013d). We then used this estimate of GDP by industry (Table 8-4) to calculate a base multiplier using the same methodology as the employment and employee compensation base multipliers. It was assumed that the agriculture, mining, manufacturing, and trade sectors were economic base sectors, along with 47% of the territorial government. The remaining territorial government and other private sectors were included in the noneconomic base industries. Table 8-4. Palau: GDP by Industry (2013) Industry GDP (in millions of 2013$) Economic base industries Agriculture 10.0 Mining 1.1 Manufacturing 2.0 Trade 28.4 Government (Public administration)a 30.1 Noneconomic base industries Electricity, gas, and water 2.2 Construction 11.3 Transport and communications 20.7 Finance 11.8 Other services 88.5 Total at basic prices 206.0 Taxes on imports less imputed bank service charges 25.7 Total at purchasers’ prices 231.8 a Note that because 47% of Palau’s budget comes from external sources, it was assumed that only 47% of the employment and employee compensation associated with public administration was part of the base sector. The remaining employees and employee compensation were assumed to be part of the nonbase sector. Source: RTI estimates based on PITI-VITI (2013c) Based on these assumptions and the data in Table 8-4, base GDP was calculated to be $55.6 million. Dividing total GDP by base GDP yields a multiplier of 4.17, meaning that for every dollar of base GDP supported by OIA funding, an estimated 3.17 of additional GDP dollars are formed elsewhere in the economy. By multiplying the direct GDP impacts of OIA payments by the GDP base multiplier, we estimate the total impact on GDP is $32.8 million. 8.5 EBA Economic Impact Estimate In summary, the $13.9 million spent by OIA inside Palau directly supports 271 jobs, $2.9 million in employee compensation, and $7.9 million in GDP. Accounting for secondary Section 8 — Republic of Palau 8-7 effects, we estimate that OIA spending supports a total of 742 jobs, $7.8 million in employee compensation, and $32.8 million. A summary of the economic impacts associated with OIA payments is presented in Table 8-5. Table 8-5. Palau: Total Estimated Economic Impact Using EBA (FY 2013) Direct Economic Impact Indirect/Induced Economic Impact Total Economic Impact Employment (#) 271 471 742 Employee compensation ($’000, 2013$) 2,982 4,800 7,782 GDP ($’000, 2013$) 7,877 24,943 32,821 Sources: RTI estimates based on OIA (2013b), PITI-VITI (2013c), PITI-VITI (2013d), Census (2009), ADB (2013), and World Bank (2013a). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). The significance of OIA’s economic contributions can be better understood when viewed in relation to the Palau economy as a whole, which is summarized in Table 8-6. Specifically, the 742 jobs directly and indirectly supported by OIA payments represent 8% of Palau’s total employment. Similarly, $7.8 million of employee compensation associated with these employees accounts for approximately 9% of total employee compensation inside the region, and the $32.8 million of GDP associated with these employees represents 14% of total GDP produced by the insular area. Table 8-6. Palau: Estimated Impacts Relative to National Economy Using EBA (FY 2013) Total Economic Impact for FY 2013 OIA Payments National Data Impact as Percentage of Total Economy Employment (#) 742 8,944 8% Employee compensation ($’000, 2013$) 7,782 90,516 9% GDP ($’000, 2013$) 32,821 231,761 14% Sources: RTI estimates based on OIA (2013b), PITI-VITI (2013c), POPS (2008), Census (2009), ADB (2013), and World Bank (2013a). All data were adjusted to 2013 dollars using the consumer price index (BLS, 2013). 9-1 9. DISTRICT OF COLUMBIA AND HAWAII In addition to payments spent directly in the insular areas, the OIA operates and spends payments in the District of Columbia and Hawaii. The economic impact of OIA operations in the District of Columbia and Hawaii was calculated using IMPLAN I/O modeling software.1 Similarly to modeling for the US territories, IMPLAN uses an I/O modeling framework that allows specific multipliers to be calculated for each industry. 9.1 Economic Impact Assessment of OIA Operations in District of Columbia The FY 2013 budget for OIA operations and the Coral Reef Initiative in Washington, DC, was $7.3million, which falls within the IMPLAN industry code 439: Federal Government, Non- Military. Similar to the analysis used for the insular areas, direct employment and employee compensation impacts can be measured using the output-to-employee and employee compensation-to-employee ratios for this sector. Direct impacts were multiplied by IMPLAN-generated multipliers to estimate the total impact of OIA activity in Washington, DC. The relevant multipliers and total impacts that were estimated for this analysis are reported in Table 9-1. The total economic impacts of OIA operations on DC are
46 employees,
$6.6 million in employee compensation, and
$7.3 million in output. 1 To estimate the total economic impact associated with this funding, we used 2010 I/O models of the Washington, DC, and Hawaii economies constructed using IMPLAN economic modeling software. IMPLAN categorizes businesses in these industries into a system of 440 industry codes. IMPLAN was selected because it is one of the most widely used I/O modeling software packages in economic development analysis. IMPLAN, like all I/O models, quantifies the economic impact using multipliers to represent indirect and induced impacts. Total impacts can be estimated by multiplying the direct impacts of the project by these multipliers. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 9-2 Table 9-1. Economic Impact Assessment of OIA Operations in District of Columbia (FY 2013) Federal Government, Nonmilitary (439) Employment (# of employees) Employee Compensation ($’000, 2013) Output ($’000, 2013) Direct Economic Impact OIA operations 46 $6,635 $7,297 Indirect and Induced Economic Impacts Multiplier 1.19 1.08 1.19 Total Economic Impact 55 $7,142 $8,717 Sources: RTI estimates based on OIA (2013b) and IMPLAN. 9.2 Economic Impact Assessment of OIA Operations in Hawaii The FY 2013 budget for OIA operations in Hawaii was $15.6 million. The details of these payments and the IMPLAN codes to which they were assigned are reported in Table 9-2. Table 9-2. 2013 OIA Operations in Hawaii and Corresponding IMPLAN Codes Funding Description Funding Amount ($2013) Industry Description IMPLAN Code Compact of Free Association Compact Impact 11,229 Hospitals 397 Total, Compact of Free Association 11,229 Assistance to Territories General technical assistance—USDA Grad School PITI-VITI 313 State and local government, education 438 General Technical Assistance—Pacific Basin Development Center 150 Federal government, nonmilitary 439 Subtotal, General Technical Assistance 463 Coral Reef Initiative 439 Brown Tree Snake Control 156 Federal government, nonmilitary 439 Maintenance assistance 1,243 Federal government, nonmilitary 439 Office of Insular Affairs 645 Federal government, nonmilitary 439 Compact Impact Discretionary 1,867 State and local government, education 438 Subtotal Other 3,911 Total, Assistance to Territories 4,374 Total Spending Inside Hawaii 15,603 Sources: RTI estimates based on OIA (2013b) and IMPLAN. Section 9 — District of Columbia and Hawaii 9-3 As in the previous analysis, direct impacts were estimated using output and employee compensation-to-employee ratios from the IMPLAN model. The direct employment, employee compensation, and output inputs are reported in Table 9-3. Table 9-3. Direct Economic Impacts of OIA Operations in Hawaii (FY 2013) Industry Description IMPLAN Code Employment (# of employees) Employee Compensation ($’000, 2013) Output ($’000, 2013) Federal Government, Nonmilitary 439 18 $1,995 $2,194 State and local government, education 438 38 $1,931 $2,180 Hospitals 397 81 $6,049 $11,229 Total 136 $9,975 $15,603 Sources: RTI estimates based on OIA (2013b) and IMPLAN. As previously discussed, direct impacts were multiplied by Type II Social Accounting Matrix multipliers generated in IMPLAN to estimate the total impact of OIA payments on the state’s economy. The relevant multipliers that were estimated for this analysis are reported in Table 9-4. Table 9-4. Selected Multipliers by Industry, Hawaii Industry Description IMPLAN Code Total Employment Impact Multiplier Total Employee Compensation Multiplier Total Output Impact Multiplier Federal government, nonmilitary 439 1.65 1.19 1.63 State and local government, education 438 1.29 1.19 1.61 Hospitals 397 1.78 1.34 1.71 Source: IMPLAN. Using these multipliers, we can compute the total economic impacts associated with OIA operations in Hawaii. The total economic impacts of this activity in Hawaii are
221 employees,
$12.8 million in employee compensation, and
$26.3 million in output. These impacts are reported in Table 9-5. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 9-4 Table 9-5. Total Economic Impacts of OIA Payments, Hawaii Industry Description IMPLAN Code Employment (# of employees) Employee Compensation ($’000, 2013) Output ($’000, 2013) Federal government, nonmilitary 439 29 $2,370 $3,575 State and local government, education 438 49 $2,294 $3,517 Hospitals 397 143 $8,121 $19,159 Totala 221 $12,785 $26,250 a Values may not add to total because of rounding. Sources: RTI estimates based on OIA (2013b) and IMPLAN. 10-1 10. COMPARISON OF ECONOMIC BASE ANALYSIS AND INPUT-OUTPUT ANALYSIS RESULTS Table 10-1 demonstrates how the total impacts by territory differ when using EBA or I/O analysis. Overall, the total impacts to the insular areas are smaller when predicted with I/O analysis. Table 10-1. Comparison of EBA and IMPLAN Total Impacts by Insular Area EBA IMPLAN Employment (#) Employee compensation ($’000; 2013$) GDP ($’000; 2013$) Employment (#) Employee compensation ($’000; 2013$) GDP ($’000; 2013$) American Samoa 1,407 23,861 152,542 1,237 29,134 44,822 Percentage of Total Economy 11% 12% 23% 9% 17% 7% Guam 6,065 167,541 241,594 4,085 108,042 132,955 Percentage of Total Economy 9% 10% 5% 15% 12% 3% CNMI 851 18,562 28,256 787 14,397 22,303 Percentage of Total Economy 4% 4% 4% 1% 2% 3% USVI 15,711 544,910 677,712 8,012 286,503 412,350 Percentage of Total Economy 35% 35% 15% 21% 23% 9% There are a few reasons that likely explain the discrepancy. First, I/O analysis’s ability to calculate a multiplier for each individual sector uses more precision than EBA, where one multiplier is used for the entire economy. In general, the I/O multipliers were smaller than the multipliers estimated using EBA. Most I/O multipliers fell between 1.00 and 2.00 while economic base multipliers usually ranged from 1.83 to 4.20, with one base multiplier for CNMI being 6.93. In addition to smaller multipliers, IMPLAN’s estimates based on BEA data had larger estimates for output-to-employee and employee compensation-to-employee ratios. These ratios were applied to OIA payments to determine direct impacts. With higher ratios for these values there were fewer estimated direct impacts. Being that this is the first year that the I/O data were available we decided to calculate total impacts to the U.S. Territories using both the EBA and I/O methods. It should be noted there is the benefit of consistency since the EBA has been used since FY2010 to estimate Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 10-2 the economic impacts to the insular areas. At the same time, the BEA data underlying IMPLAN could be simpler and more accurate because the data comes from one source. Most likely in the future I/O analysis using IMPLAN will only be available for the U.S. Territories and EBA will be the only option for determining the total impacts to the Freely Associated States. In this report we present both estimates for the OIA to compare the results and determine what role EBA and IMPLAN will have on the future of the economic impact analysis for the insular areas. 11-1 11. ANALYSIS SUMMARY The purpose of this study was to measure the economic impact of OIA payments on insular areas as measured by economic aggregates such as employment, employee compensation, and GDP. This task was accomplished primarily through the use of simple economic base models that were constructed for each of the seven insular areas. The results of this analysis are presented in the following tables and in the Executive Summary. Table 11-1. Estimated Employment Impact of OIA Payments (FY 2013) Direct Employment Impact (#) Indirect/Induced Employment Impact (#) Total Employment Impact (#) Percentage of National Employment Supported by OIA Payments (%) American Samoa 1,107 130 1,237 9% Guam 3,926 159 4,085 15% Northern Mariana Islands 661 125 787 1% U.S. Virgin Islands 7,248 765 8,012 21% Micronesia 2,471 5,409 7,880 52% Marshall Islands 1,556 2,042 3,598 34% Palau 271 471 742 8% Total 17,240 9,100 26,341 14% Source: RTI estimates. Table 11-2. Estimated Employee Compensation Impact of OIA Payments (FY 2013) Direct Employee Compensation Impact (‘000, 2013$) Indirect/ Induced Employee Compensation Impact (‘000, 2013$) Total Employee Compensation Impact (‘000, 2013$) Percentage of National Employee Compensation Supported by OIA Payments (%) American Samoa 27,137 1,997 29,134 17% Guam 105,065 2,976 108,042 12% Northern Mariana Islands 12,675 1,722 14,397 2% U.S. Virgin Islands 266,380 20,123 286,503 23% Micronesia 14,213 42,066 56,279 81% Marshall Islands 16,360 19,611 35,971 35% Palau 2,982 4,800 7,782 9% Total 444,812 93,295 538,107 14% Source: RTI estimates. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas 11-2 Table 11-3. Estimated GDP Impact of OIA Payments (FY 2013) Direct GDP Impact (‘000, 2013$) Indirect/Induced GDP Impact (‘000, 2013$) Total GDP Impact (‘000, 2013$) Percentage of National GDP Supported by OIA Payments (%) American Samoa 35,316 9,506 44,822 7% Guam 106,787 26,169 132,955 3% Northern Mariana Islands 14,888 7,414 22,303 3% U.S. Virgin Islands 268,570 143,780 412,350 9% Micronesia 66,455 119,531 185,986 56% Marshall Islands 33,654 44,165 77,819 44% Palau 7,877 24,943 32,821 14% Total 533,547 375,509 909,056 9% Source: RTI estimates. R-1 REFERENCES American Samoa Department of Commerce (ASDC). 2008. American Samoa’s Economic Future and the Cannery Industry. http://www.spc.int/prism/Country/AS/stats/canneries.pdf. American Samoa Treasury Department (ASTD). 2010. Territory of American Samoa—Basic Financial Statements (Year Ended September 30, 2009). http://www.doi.gov/archive/oia/reports/PDF/ASG_FY2009FSSA.pdf. Asian Development Bank (ADB). 2013. 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American Samoa and Commonwealth of the Northern Mariana Islands—Employment, Earnings, and Status of Key Industries Since Minimum Wage Increases Began. http://www.gao.gov/new.items/d11956t.pdf Guam Bureau of Statistics and Plans (GBSP). 2012a. Guam 2010 Statistical Yearbook Updates: Labor Force and Employment Indicators. http://www.bsp.guam.gov/Labor%20Force_2011.1.pdf Guam Bureau of Statistics and Plans (GBSP). 2012b. Guam 2010 Statistical Yearbook Updates: Military on Guam. http://www.bsp.guam.gov/Federal%20Programs_2011.1.pdf. Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas R-2 Guam Office of Finance and Budget (GOFB). 2010. 1 Government of Guam Revenues Presentation. http://www.senbenp.com/OFB/US%20Treasury%20Documents/SES%20FY11%20Re venue%20Presentation%20-%20August%2011,%202010.pdf. Impact Analysis for Planning (IMPLAN). 2013. Data for U.S. Territories. Purchased from http://www.implan.com Kan, S.A. November 15, 2013. 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Babauta Regarding H.R. 6040, to Approve the Agreement Providing Terms for a Continuation of the Free Association between the United States and Palau. http://www.doi.gov/oia/press/2012/09102012.cfm. Office of Insular Affairs (OIA). 2012b. OIA Announces $1.085 Million in “Empowering Insular Communities” Grants to Guam for Sustainable Energy Projects. http://www.doi.gov/oia/press/2012/08302012.cfm. Office of Insular Affairs (OIA). 2012c. Statement of Anthony M. Babauta Regarding H.R. 6040, to Approve the Agreement Providing Terms for a Continuation of the Free Association between the United States and Palau. http://www.doi.gov/oia/press/2012/09102012.cfm. Office of Insular Affairs (OIA). 2013a. “2014 Congressional District Report.” Provided by the Office of Insular Affairs to RTI International. 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Performeters for the Insular Areas. http://www.pitiviti.org/initiatives/performeter.php. Palau Office of Planning and Statistics (POPS). 2008. Palau Quarterly Economic Releases, Employment—1st-4th Quarter 2008. http://www.palaugov.net/stats/ QTRLY_Econ/qrtly_rpts.htm. Pike, C. 2007. Guam Tourism Economic Impact. http://www.doleta.gov/Programs/ 2006ReportsAndPlans/Economic_Analysis_Reports/GU-4.pdf. Schneider, F. 2002. “Size and Measurement of the Informal Economy in 110 Countries around the World.” http://www.amnet.co.il/attachments/informal_economy110.pdf. U.S. Bureau of Economic Analysis (BEA). 2013. Gross Domestic Product (GDP) for the U.S. Territories. http://bea.gov/national/gdp_territory.htm. U.S. Bureau of Labor Statistics. 2013. Consumer Price Index. Series ID CUUS0000SA0. http://www.bls.gov/cpi/. U.S. Bureau of Labor Statistics. 1986. U.S. Productivity Growth since 1982: The Post- Recession Experience. http://www.bls.gov/opub/mlr/1986/12/art3full.pdf. 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Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas R-4 U.S. Department of Agriculture (USDA). 2011. Census of Agriculture—American Samoa (Table 4). http://www.agcensus.usda.gov/Publications/2007/Full_Report/ Outlying_Areas/AmericanSamoa.pdf. U.S. Virgin Islands Bureau of Economic Research. 2012. U.S. Virgin Islands Annual Economic Indicators. http://www.usviber.org/pdfs/ECON11.pdf. Wang, X., and R. vom Hofe. 2007. Research Methods in Urban and Regional Planning. Beijing, China: Tsinghua University Press. World Bank. 2013a. World Bank Data (Indicators—GDP). http://data.worldbank.org/indicator/NY.GDP.MKTP.CD. World Bank. 2013b. World Bank Data (Indicators—Population). http://data.worldbank.org/indicator/SP.POP.TOTL. A-1 APPENDIX A: ALLOCATION OF FY 2013 TECHNICAL ASSISTANCE AND OTHER PAYMENTS BY INSULAR AREA OIA grants and federal payments for technical assistance and other initiatives are made or distributed as needed during each fiscal year. For FY2013 payments we relied on two sources to determine payments to the insular areas. First we used the 2015 Congressional Report as the most recent estimate of FY2013 funding, we then used the 2014 Budget Justification from the OIA to further breakdown spending categories in order to understand which economic sector to apply certain payments. Table A-1 presents a breakdown of general technical assistance by grant/program and by the insular area receiving the funds. In several cases, the exact amount of funding going to each insular area was indicated in the Congressional Report or Budget Justification. However, in several cases, information was not available for how the funds associated with particular grants/programs would be distributed by area, so we made assumptions. These cases included the following:
Allocation for the Direct Grants to Insular Areas, part of General Technical Assistance funding, was not available at the time of this report. Therefore, RTI applied percentage distributions based on the FY 2013 budget (Table A-2).
USDA Graduate School PITI-VITI: A total of $2.5million was allocated to this program for FY 2013. Because the PITI-VITI serves all seven insular areas, this $2.5 million was distributed evenly across all seven areas and Hawaii (where the PITI-VITI offices are located).
Close Up Foundation: A total of $1.08 million was allocated to this program for FY 2013. This money is received directly by the Close Up Foundation, but no additional information for how these funds might be distributed across each insular areas was provided. Therefore, the $1.08 million was divided evenly across all seven insular areas.
Prior Service Benefits Program: A total of $1 million was allocated to this program, which is distributed to 351 recipients in CNMI, 711 in FSM, 234 in RMI, and 307 in Palau. It was assumed that this $1 million was distributed to each of these insular areas in proportion to the number of recipients located in each.
Judicial training: A total of $320,000 was allocated to this program for FY 2013. According to OIA (2012b), these payments fund judicial training for the insular areas in the Pacific. Therefore, the funding was allocated evenly through the Pacific insular areas.
In a few instances the OIA’s Congressional Report or Budget Justification did not explain where certain payments had been allocated, but further information about these payments was found using OIA’s website announcements. A statement made by the OIA’s Assistant Secretary of the Interior to Congress also provided details on payment allocations for Palau (OIA, 2012c). We assumed this distribution was similar for FY2013. For several other categories of OIA funding, the actual allocation by insular area was unknown, but information about the total amount of funding for the funding category was listed. RTI was able to use the funding totals and percentage distribution from FY 2012’s budget to estimate FY 2013 allocations by island for the American Samoa Operations Grants, and direct payments to the insular areas (Table A-2). Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas A-2 Table A-1. Estimation of FY 2013 General Technical Assistance by Area Treatment American Samoa Guam CNMI US Virgin Islands Federated States of Micronesia Republic of Marshall Islands Republic of Palau Hawaii Other Total Direct Grants To Insular Areas Government $372,620 $885,082 $1,376,303 $1,797,603 $223,041 $228,351 $— $— $— $4,883,000 USDA Grad School PITI VITI Education $312,500 $312,500 $312,500 $312,500 $312,500 $312,500 $312,500 $312,500 $— $2,500,000 U.S. Bureau of Commerce, BEA (for GDP data) Internal Transfer $— $— $— $— $— $— $— $— $750,000 $750,000 Close Up Foundation Education $153,571 $153,571 $153,571 $153,571 $153,571 $153,571 $153,571 $— $— $1,075,000 Junior Statesmen Internal Transfer $— $— $— $— $— $— $— $— $357,000 $357,000 4 A Toll Health Care Program Health Care $— $— $— $— $— $990,000 $— $— $— $990,000 Pacific Basin Development Center Government $— $— $— $— $— $— $— $150,000 $— $150,000 Prior Service Benefits Program Private $— $218,964 $— $— $443,543 $145,976 $191,516 $— $— $1,000,000 Judicial Training Government $53,333 $53,333 $53,333 $— $53,333 $53,333 $53,333 $— $— $320,000 CDC Internal Transfer $— $— $— $— $— $— $— $— $50,000 $50,000 CNMI Ombudsman’s Office Government $— $250,000 $— $— $— $— $— $— $— $250,000 CNMI Immigration, Labor and Law Enforcement Government $— $150,000 $— $— $— $— $— $— $— $150,000 Total $— $892,024 $2,023,452 $1,895,708 $2,263,674 $1,185,989 $1,883,732 $710,921 $462,500 $1,157,000 $12,475,000 Economic Impacts Attributable to FY 2013 Federal Grants and Payments to Seven Insular Areas A-3 Table A-2. Estimation for FY 2013 Payments by Insular Area Using FY 2012 Actuals Insular Area FY 2012 Actual Payments ($’000, 2012$) FY 2012 Distribution, by Insular Area (%) Estimated FY 2013 Payments ($’000, 2013$) General Technical Assistance—Direct Grants to Insular Area American Samoa 842 7.63% 373 Guam 3,110 28.19% 1,376 Northern Mariana Islands 2,000 18.13% 885 U.S. Virgin Islands 4,062 36.81% 1,798 Federated States of Micronesia 504 4.57% 223 Republic of the Marshall Islands 516 4.68% 228 Republic of Palau — — — Hawaii — — — Other — — — Total 11,034 4,883 American Samoa Operations Grants General Operations 14,063 61.53% 13,971 LBJ Hospital Operations 7,900 34.56% 7,848 High Court 893 3.91% 887 Total 7,900 34.56% 7,848 Source: RTI estimates based on OIA (2013b).