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The morale of the work force, which understandably was extremely low at the time the Treaty took effect, is now beginning to build. Employee morale has been a matter receiving priority attention from management. The task is all the more difficult as issues impacting on the quality of life surface.
The full-time permanent work force immediately prior to October 1 was approximately 12,200 employees. The number of employees separated through a reduction-in-force was approximately 460 and 2,300 employees were transferred to elements of the Department of Defense. An additional 1,440 employees terminated their employment voluntarily through retirement or resignation. The combination of these actions reduced the full-time permanent work force to something over 8,000 employees, of which approximately 2,000 are U.S. citizens and 6,000 are Panamanians and third country nationals. We also employ up to 1,000 individuals on a part-time or temporary basis, of whom about 700 are Panamanians. Of the 8,000 permanent employees remaining with the Commission, over 1,300 were either reassigned to other jobs or reduced in grade, or both, on October 1.
Working to minimize the impact of these actions on personnel, a priority placement program is in effect which seeks to place U.S. citizen employees in like jobs in other Federal agencies in the United States. Another program is the priority reemployment program which assures that those employees who lost their jobs because of the Treaty have first consideration in hiring. The third program, the promotion priority program, is designed to give employees who lost grades preferential consideration for promotion back to their former grade.
The Panama Canal employment system currently under development, in accordance with the provisions of section 1212, the Panama Canal Act of 1979, includes provision for granting hiring preference to Panamanians, a five-year rotation policy for recruitment outside of Panama, and a reduction in the need for off-the-Isthmus recruitment through intensified local recruitment efforts and special training and development programs. The hiring preference for Panamanians provides for adding eleven extra points to the numerical scores of all Panamanian applicants tested after October 1 who have achieved a passing score. The five-year rotation policy has also been established. Procedures to implement the other changes are being developed at this time. We are also emphasizing training that will contribute to increased Panamanian participation in all areas and levels of the Panama Canal Commission, as required by the Treaty.
I am pleased to advise that an exchange of diplomatic notes took place between the United States and Panama on March 25 which effectively settled the issue of collection of overdue receivables. By one note, Panama has agreed that amounts owed to the former Canal agencies will either be paid in cash in nine quarterly installments or may be offset against treaty payments due Panama. In the other note, the United States agreed that the Commission will make treaty payments in monthly remittances, except for any amounts that may become due under the contingent payment provided for in Article XIII(4)(c). Any payment due Panama under this latter provision would be made no later than April 30 of each year. To date, Panama has received $40.8 million, representing $42.7 million in treaty payments less $1.9 million in offsets for amounts due from Panama.
Another event of particular signifiance was the first meeting of the Commission Board, held earlier this month in Panama. The Board began to address many issues, and I believe the foundation was laid for successful participation by Panama in the management of the Canal.
I should now like to move from the general situation to our authorization request.
AUTHORIZATION REQUIREMENTS
The authorization request covers two appropriations for the Panama Canal Commission in fiscal year 1981, totaling $419.5 million. One is an appropriation of $394.5 million covering both operational and capital requirements of the Commission. Of that amount, $23.0 million is for capital equipment and construction to remain available until expended. A second authorization of $25.0 million is requested to establish the Panama Canal Emergency Fund. All funds authorized for appropriation to the Commission are to come from the Panama Canal Commission Fund.
OPERATING EXPENSES
The appropriation required for operating expenses in 1981 is $371.5 million. The major cost components of this total are $184.4 million for personnel compensation, $78.6 million for Treaty payments to Panama, $38.5 million for supplies