Statement on Signing the Bill Affecting the Laws Governing United States Insular Areas and Alaska

August 27, 1986

I have signed H.R. 2478, legislation that will make a variety of changes to current law affecting the Virgin Islands, the Northern Mariana Islands, American Samoa, Guam, Puerto Rico, the Federated States of Micronesia, the Republic of the Marshall Islands, and the State of Alaska.

While H.R. 2478 contains a number of desirable provisions, as well as some the administration has advised against, it contains one critical provision that requires comment. Section 19(b) of H.R. 2478 would make the Gramm-Rudman-Hollings sequestration procedure inapplicable to payments to Guam, Puerto Rico, and the Virgin Islands of excise and/or income taxes collected by the Federal Government resulting from economic activity on these islands. It would also exempt from sequestration certain payments to the Northern Mariana Islands under a preexisting covenant negotiated with the Islands and backed by the full faith and credit of the United States. Statements on the floor of the House of Representatives indicated that the exemption from Gramm-Rudman-Hollings contained in section 19(b) was intended to be limited to these payments. There was no written report on this item.

Notwithstanding the apparent intent of the Congress, however, the language of section 19(b) could be read to exempt from Gramm-Rudman-Hollings an open-ended variety of mostly discretionary payments authorized over past years. For example, it could exempt from sequestration all payments made to Guam, Puerto Rico, and the Virgin Islands under the acts cited in section 19. It also could be deemed to exempt all payments to these jurisdictions and to the Northern Mariana Islands under a 1978 omnibus territories authorization act (P.L. 95 - 348). While the cumulative effect of these additional exemptions is not now susceptible of precise determination, any such exemptions would be unacceptable.

Our efforts to reduce the Federal deficit have entered into a critical period. If we are unable to achieve as many reductions as are necessary to meet the deficit reduction targets under the Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act, which I believe can be accomplished through regular legislative and appropriations action, then it is essential that the sequestration process proceed unimpeded. Under such circumstances, I must oppose any effort to protect specific programs from Gramm-Rudman-Hollings sequestration except in the most unusual circumstances. The ambiguous language in section 19(b), if interpreted broadly as described above, would create an unjustified exemption from Gramm-Rudman-Hollings and set a serious and damaging precedent. If such an exemption were allowed in this case, it could start in motion a growing snowball of sequestration protections for other programs and threaten to render inoperable the entire Gramm-Rudman-Hollings approach to the deficit problem.

We must not risk such results. For this reason, I am signing H.R. 2478 only after receiving from the congressional jurisdictional committee leadership their assurances that section 19(b) was not intended to create broad exemptions from Gramm-Rudman-Hollings, and they will endeavor to enact clarifying legislation at the earliest possible time. Without these assurances, I could not sign H.R. 2478.

Note: H.R. 2478, approved August 27, was assigned Public Law No. 99 - 396.