Puerto Rico's budget director says the U.S. territory cannot pay off its debt and provide essential services at the same time.

Luis Cruz Batista spoke Monday during a public hearing in which Puerto Rico legislators debated a proposed $9.1 billion budget.

He warned that nearly 3,500 public employees would have to be laid off in part if the island were required to meet all its debt obligations. Cruz said other scenarios include reducing the work week and making deeper cuts to the health, public security and education sectors.

The proposed budget sets aside only $209 million to help pay interest tied to a $2 billion debt payment due July 1.

Puerto Rico is mired in a 10-year economic slump and its government is grappling with $70 billion in public debt.