Gov. Linda Lingle said yesterday that she will pursue further state spending cuts and layoffs, after describing the response by two public-sector labor unions to the state's latest contract offers as "unacceptable and unrealistic."

The governor said she will hold a Cabinet meeting this weekend to discuss the state budget, after the latest forecast by the state Council on Revenues expanded the expected deficit by between $92 million and $98 million, to at least $878 million through June 2011.

The state had made an offer to the Hawai'i Government Employees Association that involved 24 furlough days this fiscal year, starting in October, and 24 days in the next fiscal year. The state also agreed to stop most of the 1,100 layoffs the governor has set to start in September. The governor said a similar offer was made to the United Public Workers but that the union did not respond.

The HGEA responded Thursday with a counter-offer that involved 18 furlough days this fiscal year and 12 days next year. The union also wants the state to continue to cover 60 percent of worker health care premiums as those costs rise.

Lingle said she had believed the state was very close to an agreement with the HGEA before reviewing the union's counter-proposal. The administration, for example, informed nonunion state workers Thursday that their furloughs would be delayed until October because a deal with the union might be close. The nonunion furloughs will now go forward in mid-September, two weeks later than planned because of payroll issues.

"The response that we got, as I said, was just completely unacceptable," Lingle said at the state Capitol.

UNION RESPONSE

Randy Perreira, the HGEA's executive director, said it is Lingle who has shown she is unwilling to negotiate.

"The HGEA negotiating teams put forth a counteroffer with a substantial concession that they felt their fellow members could afford to live on," he said. "Contrary to the public statements the governor made today, claiming that HGEA prefers layoffs to furloughs, our negotiators proposed two furlough days per month effective Oct. 1.

"By rejecting it outright, the governor has clearly shown she is not willing to negotiate, and intended to implement layoffs all along. The governor wants a 'blank check,' and as the economy worsens, she'll continue to demand more cuts from her own employees. She is choosing to ignore other options to address the budget shortfall, including a proven private-sector cost-reduction method of offering employees an early retirement option."

The UPW did not return a telephone call seeking comment.

The HGEA and the UPW have binding arbitration hearings with the state set in September. The Hawai'i State Teachers Association and the University of Hawai'i Professional Assembly are also in contract negotiations with the state.

Lingle said the impression of the state's negotiating team is that the HGEA has made a decision to favor layoffs over furloughs.

"We offered what was a real compromise to the unions in order to avoid — doing everything we could to avoid — layoffs, because that's been my priority from the beginning," she said. "But that, clearly, was not their priority."

BINDING ARBITRATION

The governor said her negotiating team is now focused on preparing for arbitration hearings.

"We need to prepare for that. We're a little bit behind because we had taken the unions as being sincere in wanting to negotiate, but again, our impression at this point is that they are hanging their hat on binding arbitration and that it was their desire to have layoffs instead of furloughs," she said.

"There's no other explanation for their action yesterday."

Lingle also briefed state Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), and state House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo Valley, Wilhelmina Rise), privately yesterday about the state's financial plan.

The Lingle administration had suggested previously that more spending cuts and layoffs would be likely if revenues continue to decline. On Thursday, the Council on Revenues projected a steeper revenue decline this fiscal year than it had earlier estimated but a healthier rebound in the next fiscal year.

HGEA leaders told their members Thursday that they had taken the state's offer seriously because it was the first to step back from the governor's previous insistence of three furlough days a month, which is about a 14 percent pay cut. The union had previously offered one furlough day a month, which would be about a 5 percent pay cut.

But union leaders also said the state's offer would create a serious hardship on members and did not preclude future layoffs.