Let's take a step back in history:
There was never such a thing as a Palestinian State. After the fall of the Ottoman Empire, the British had administrative control over this area. They proposed a division plan according to the population. The Palestinian people rejected this plan, and sought to overturn it with the support of their Arab brethren. They were defeated, and the State of Israel came into being. There is no payment necessary for this land.
And, if you think that is wrong, please do note that after the fall of the Mughal Empire, the British had administrative control over the subcontinent too.They proposed a division plan according to the population. The people accepted this plan, and the States of Pakistan and India came into being.
Not accepting Israel's existence is the same as not accepting the Partition too, if one is being intellectually honest. You cannot pick and choose here.