Palau Averts Shutdown With Stopgap Budget, but Delays Raise Accountability Questions

By: L.N. Reklai

KOROR, Palau — Palau narrowly avoided a government shutdown this week after lawmakers rushed to pass a three-month stopgap budget, underscoring a recurring problem of delayed budget approvals that has left the country vulnerable at critical moments.

Early Oct. 1, President Surangel Whipps Jr. signed Senate Bill No. 12-39, SD2, HD2 — the Continuing Budget Authority (CBA) — into law. The measure allows government operations to continue through Dec. 31, capped at 25% of the fiscal 2025 budget.

The CBA comes after months of gridlock between the House of Delegates, which holds budget authority this year under Olbiil Era Kelulau (OEK) protocol, and the Senate. Despite beginning the budget cycle in July, differences between the two chambers, combined with absences of key House negotiators, pushed the government to the brink of closure.

This sequence clarifies that the return of House conferees on September 27 enabled the next round of fast-paced amendments and negotiations, but their initial absence after September 19 was the key procedural cause for the conference’s failure to convene. This directly led to the Senate’s unilateral actions and the eventual last-minute rush that typified the FY2026 budget impasse.

Date	Event	Source	Narrative/Explanation
July 8	President submits FY2026 proposal	FY2026 Unified Budget proposal	The President starts the annual budget cycle by transmitting the proposed budget.
Aug 15	House transmits amended bill to Senate	House transmittal, HB 12-23-3, HD2 [1]	The House adopts and forwards its amended version, initiating formal inter-chamber negotiation.
Sept 18	Senate transmits its version to House	Senate HB 12-23-3, HD2, SD9	Senate returns a revised draft, HB 12-23-3, HD2, SD9, to the House for consideration.
Sept 19	House rejects SD9, appoints conferees	HOD Conferee Members letter	The House formally rejects the Senate bill, forming a conference committee for reconciliation.
Sept 19-20	Six HOD conferees (including Chair and Speaker) depart; conference not possible	Committee records, news [2]	The absence of key House leaders leaves the negotiation process stalled for days.
Sept 19-27	Budget talks stalled—HOD conferees absent	News, session records	Stalemate: no official negotiations or conference activities occur in this period.
Sept 25	Senate passes Continuing Budget Authority (CBA) to House	Senate SB 12-39, SD2 [3][4][5]	Frustrated by the deadlock, Senate adopts and sends a stopgap measure to the House.
Sept 25	Senate W&M informs House on CBA and readiness	Letter, committee records	Senate Ways & Means signals urgency, but notes inaction due to House absence.
Sept 27	HOD conferees and leaders return	News, session notes	House regains capacity to act, increasing hope for resumed talks as deadline approaches.
Sept 30	House amends CBA bill, tries to insert full FY2026 budget	Chamber records, session logs	The House returns a drastically amended CBA bill by inserting its full budget text, escalating the standoff.
Sept 30	Senate returns House transmission, issues correction memo	Senate Clerk Sidoi letter	Senate returns the House-amended bill for lack of correct style, mark-up, and procedural adherence.
Sept 30	President Whipps calls joint meeting of leadership	Official communications, meeting summary	Recognizing the parlous state of the process, the President convenes both chambers to seek a resolution.
Sept 30	House retracts/amends SB 12-39, SD2, restores CBA (3 months/25%)	HOD records, draft bills	The House retracts its prior changes, agreeing to a pared-down, short-term CBA proposal.
Sept 30	Senate adopts SB 12-39, SD2, HD2, CBA	Senate final voting records	Senate adopts the new compromise version, setting up final transmission to the executive branch.
Sept 30	President Memo: government to close Oct 1	Whipps government memo	In the final hours, President warns staff of technical government shutdown due to missed deadline.
Oct 1	CBA transmitted to President	Senate/House transmission logs	The Continuing Budget Authority is formally sent to the President for signature.
Oct 1	CBA signed, government reopens	Signing statement	Presidential signature on the short-term CBA averts a prolonged shutdown; government resumes operations.

This timeline now accurately reflects the return of House leadership as a key transition point between the Senate’s unilateral urgency actions and the final legislative scramble that led to a compromise solution.

How the Budget Process Broke Down

The fiscal 2026 budget process began on July 8 when Whipps submitted his $152 million proposal. It included 25 separate policy amendments, ranging from Social Security and pension reforms to civil service, utilities, fisheries, and agency restructuring.

The House revised that proposal, increasing the authorization to $154 million and appropriations to $152.8 million. It removed most of the policy amendments, boosted subsidies for power, water and wastewater services, and inserted capital improvement funding for some states before passing its version on Aug. 15.

On Sept. 18, the Senate returned a $153 million version that shifted priorities significantly. It cut $10 million from the Executive Branch budget, reduced state block grants, and trimmed some funding for agencies and commissions. At the same time, it increased subsidies for utilities, raised social benefits for retirees by boosting the monthly allowance from $480 to $600, and allocated more for scholarships and educational assistance. It also replaced the proposed across-the-board 10% government salary increase with a cost-of-living adjustment, excluding foreign contract workers and employees whose salaries are set by law.

The House rejected the Senate’s version the next day and appointed conferees. But negotiations stalled when six House conferees — including the Speaker and Finance chair — left the country for a week, preventing the conference committee from meeting.

By Sept. 25, with no resolution in sight, the Senate passed a temporary CBA to prevent a shutdown. The House amended that measure days later, stripping it of its content and inserting its own full budget text. The Senate rejected the move, and only after a last-minute meeting convened by the president did the House backtrack, agreeing to a scaled-down three-month CBA.

A Recurring Problem With Added Stakes

Delays in passing the national budget are not unusual in Palau’s government, where bicameral negotiations often stall over appropriations and policy riders. But leaving the nation without a budget plan until the eve of a shutdown places unnecessary risk on government operations, employees, and essential services.

Ultimately, responsibility for the delay rests with the House of Delegates, which is charged with managing the budget process this year. The absence of its key negotiators during a critical period stalled progress and forced reliance on a stopgap measure. Lawmakers now have until the end of December to reconcile differences and pass the full fiscal 2026 budget.

The OEK must now resolve its budget disputes within the next three months or face another funding crisis at year’s end.