U.S. relations with the FAS began when American forces liberated the islands near the end of World War II. In 1947, the United Nations assigned the United States administering authority over the Trust Territory of the Pacific Islands, which included what are now the Republic of Palau, the FSM, and the RMI. Interior’s Office of Insular Affairs (OIA) has primary responsibility for monitoring and coordinating all U.S. assistance to the FAS, and the Department of State is responsible for government-to-government relations. All three compacts give the United States responsibility for the defense of the FAS and provide the United States with exclusive military use rights in these countries. According to the Department of Defense, the compacts have enabled it to maintain critical access in the Asia–Pacific region. In 2014, Palau had the smallest population of the three nations, but its per capita gross domestic product (GDP) was about four times greater than the FSM’s or the RMI’s (see table 1). Economic growth has varied among the three nations. After adjustment for inflation, per capita GDP in the FSM was unchanged from 2004 to 2014 but grew by 11 percent in the RMI and 8 percent in Palau. The U.S. and Palau governments concluded their Compact of Free Association in 1986, and the compact entered into force on October 1, 1994. Key provisions of the Palau compact address the sovereignty of Palau, types and amounts of U.S. assistance, security and defense authorities, and periodic reviews of compact terms. (See app. I for a table summarizing the key provisions of the Palau compact.) In fiscal years 1995 through 2009, the United States provided about $574 million in compact assistance to Palau, including $70 million to establish Palau’s compact trust fund and $149 million for road construction. In addition, U.S. agencies—the Department of Education, the Department of Health and Human Services (HHS), and Interior, among others—provided assistance to Palau through discretionary federal programs as authorized by U.S. legislation and with appropriations from Congress. On September 3, 2010, the governments of the United States and Palau reached an agreement to extend U.S. assistance to Palau, totaling approximately $216 million in fiscal years 2011 through 2024. The planned assistance included extending direct economic assistance to Palau, providing infrastructure project grants and contributions to an infrastructure maintenance fund, establishing a fiscal consolidation fund, and making changes to the compact trust fund. The 1986 Compact of Free Association between the United States, the FSM, and the RMI provided a framework for the United States to work toward achieving its three main goals: (1) to secure self-government for the FSM and the RMI, (2) to assist the FSM and the RMI in their efforts to advance economic development and self-sufficiency, and (3) to ensure certain national security rights for all of the parties. The second goal of the compact—advancing economic development and self-sufficiency for both countries—was to be accomplished primarily through U.S. direct financial payments (to be disbursed and monitored by Interior) to the FSM and the RMI. Under the 1986 compact, U.S. assistance to the FSM and the RMI to support economic development was estimated, on the basis of Interior data, at about $2.1 billion in fiscal years 1987 through 2003. In addition, other U.S. agencies provided assistance to the FSM and RMI in the form of grants, services, technical assistance, and loans. In 2003, the United States approved separate amended compacts with the FSM and the RMI. The amended compacts provide for direct financial assistance to the FSM and the RMI in fiscal years 2004 through 2023, decreasing in most years, with the amount of the decrements to be deposited in trust funds for the two nations established under the amended compacts. The amended compacts’ enabling legislation authorized and appropriated funds for the compact trust funds. The trust funds are to contribute to the economic advancement and long-term budgetary self-reliance of each government by providing an annual source of revenue after fiscal year 2023. After the grants end in fiscal year 2023, trust fund proceeds are to be used for the same purposes as grant assistance, or as mutually agreed, with priorities in education and health care. (See app. II for further information about planned U.S. trust fund contributions and grants to the FSM and RMI through fiscal year 2023.) The amended compacts identify the additional 20 years of assistance— primarily in the form of annual sector grants and contributions to the compact trust fund for each country—as intended to assist the FSM and RMI governments in their efforts to promote the economic advancement and budgetary self-reliance of their people. The amended compacts and their subsidiary agreements, along with the countries’ development plans, target the grant assistance to six sectors—education, health, public infrastructure, the environment, public sector capacity building, and private sector development—prioritizing two sectors, education and health. Interior projects that it will provide the FSM $2.1 billion under the compact, while economic assistance and trust fund contributions to the RMI will total $1 billion in fiscal years 2019 through 2023. The amended compacts also provided for a joint economic management committee for the FSM and a joint management and financial accountability committee for the RMI to promote the effective use of compact funding. In practice, the committees allocate grants and attach terms and conditions to grant awards through resolutions, which the committees discuss and vote on at their meetings. OIA has responsibility for administration and oversight of the FSM and RMI compact grants. The public law implementing the amended compacts required the President to submit annual reports to Congress regarding the FSM and RMI, a reporting requirement that has been delegated to the Secretary of the Interior. Every 5 years, these annual reports are to include additional information, including findings and recommendations, pertaining to reviews that are required by law to be conducted at 5-year intervals. The compacts provide for FAS citizens to enter and reside indefinitely in the United States, including its territories, without regard to the Immigration and Nationality Act’s visa and labor certification requirements. Since the compacts went into effect, thousands of migrants from the FAS have established residence in U.S. areas, particularly in Guam, Hawaii, and the CNMI. In the 2003 amended compacts’ enabling legislation, Congress authorized and appropriated $30 million annually for 20 years for grants to Guam, Hawaii, the CNMI, and American Samoa, which it deemed affected jurisdictions, and authorized additional appropriations. The $30 million annual appropriation is to aid in defraying costs incurred by these jurisdictions as a result of increased demand for health, educational, social, or public safety services, or for infrastructure related to such services, due to the residence of compact migrants in their jurisdiction. Congress directed Interior to divide the $30 million compact impact grants among the affected jurisdictions in proportion to the most recent enumeration of those compact migrants residing in each jurisdiction. The U.S. Bureau of the Census (Census) conducted these enumerations in 2003, 2008, and 2013. If enacted, S. 2610 would approve, provide funding for, and make modifications to the September 2010 agreement between the governments of the United States and Palau regarding their compact. S. 2610 would not greatly alter the total U.S. assistance to Palau for fiscal years 2011 through 2024 specified in the 2010 agreement. However, S. 2610 would make changes to the provision of assistance outlined in the agreement in line with the reduction in U.S. assistance in fiscal years 2011 through 2016 from that planned in the 2010 agreement. The annual trust fund contributions and withdrawal conditions that S. 2610 details would improve the fund’s prospects for sustaining scheduled payments through fiscal year 2044. Under S. 2610, U.S. assistance to Palau would total about $216 million— approximately equal to the amount specified in the 2010 agreement—for fiscal years 2011 to 2024. However, after 2016, larger amounts of assistance would be provided under S. 2610 than the annual amounts scheduled under the 2010 agreement. Under the 2010 agreement, which has not been implemented, annual U.S. assistance to Palau would have declined over 14 years from roughly $28 million in 2011 to $2 million in 2024. The 2010 agreement includes the following: Direct economic assistance ($107.5 million). The 2010 agreement would provide direct economic assistance—budgetary support for Palau government operations and specific needs such as administration of justice and public safety, health, and education—of $13 million in 2011, declining to $2 million by 2023. The 2010 agreement also calls for the U.S. and Palau governments to establish a five-member Advisory Group to provide annual recommendations and timelines for economic, financial, and management reforms. The Advisory Group must report on Palau’s progress in implementing these or other reforms, prior to annual U.S.–Palau economic consultations. These consultations are to review Palau’s progress in achieving reforms such as improving fiscal management, reducing the public sector workforce and salaries, reducing government subsidization of utilities, and implementing tax reform. If the U.S. government determines that Palau has not made significant progress in implementing meaningful reforms, direct assistance payments may be delayed until the U.S. government determines that Palau has made sufficient progress. Infrastructure projects ($40 million). Under the 2010 agreement, the U.S. government would provide U.S. infrastructure project grants to Palau for mutually agreed infrastructure projects—$8 million in 2011 through 2013, $6 million in 2014, and $5 million in both 2015 and 2016.