Palau Going Broke, Laying Off Workers

The government of this Pacific nation announced Thursday that it is laying off two-thirds of its employees because it has run out of money to pay salaries.

President Lazarus Salii said he took the action because a proposed compact of free association with the United States, which would have brought in U.S. aid if approved, apparently was headed for defeat.

With about 2,000 votes still to be tabulated after a referendum Tuesday on the proposed agreement, the compact had received about 66% approval. The unofficial vote on the referendum was 3,795 yes, 1,985 no.

Under a court ruling last August, the proposed political and financial agreement needed 75% approval to override a Palau constitutional ban on nuclear weapons.

The terms of the compact would allow for visits by U.S. nuclear warships in return for a promise by Washington not to test, store, dump or use nuclear and other unconventional weapons intended for warfare in Palau.

Salii said about 900 of the 1,331 employees currently working for the executive branch of the government will be furloughed effective July 8. They will return to work on Oct. 1, the beginning of the new fiscal year.

Layoff notices were to be sent today with employees’ paychecks. The last paycheck for the furloughed employees will be on July 17.

Salii said that the govenment has a $1.6-million shortfall and that the payroll for the last quarter of the fiscal year would be about $3.2 million.

“Clearly the remaining cash balance is not enough to accommodate the current rate of payroll,” he said.

Salii said only essential services will be maintained for the balance of the fiscal year. These include power, water, sewer, health, police and fire and a minimum of administrative workers.

About 60% of Palau’s work force is employed by the national government.

Last January, the government imposed a 20% reduction in salaries.

Palau’s 13,870 residents live on eight of 200 islands in a 400-mile-long archipelago in the Western Pacific west of the International Date Line. Palau is about 600 miles from the Philippines, 800 miles southwest of Guam and 4,500 miles southwest of Hawaii.

Under the proposed agreement, the United States would have provided close to $1 billion in economic aid over a 50-year period. Of that amount, $141 million would come in the first year once the agreement was put into effect.

Palau also would have become self-governing, with the United States responsible for its defense and security.

The island chain, once occupied by Japan, is the last of 11 trusteeships established in 1947 by the United Nations following the end of World War II.