Gov. Linda Lingle's plan to furlough state workers will hurt consumer spending, local economists said.

Lingle yesterday outlined a proposal to furlough state's 46,000 employees three days a month, in a move to save more than $688 million over the next two years while avoiding layoffs.

University of Hawai'i economist Byron Gangnes said the plan will probably curtail consumer spending by state workers.

The furloughs, which are equivalent to a 13.8 percent pay cut, could hurt a portion of the private sector that relies on spending by state workers and their families.

"When you take that kind of money out of the economy, it's going to affect spending and it's going to affect jobs in other sectors of the economy," Gangnes said.

"More people are at risk of losing their homes and (having to file for) personal bankruptcies."

According to Gangnes, state workers account for about $3.85 billion, or nearly 10 percent, of the $39.5 billion in total labor income earned by all state residents.

A 13.8 percent reduction in income translates into more than $500 million in reduced purchasing power.

When asked if she were concerned about the impact on the economy of the furloughs, Lingle said the alternative would have been to lay off up to 10,000 state workers, which would have had a more severe effect.

Lingle also ruled out raising taxes, saying it would cause further hardship on local residents and further harm the economy.

Leroy Laney, a Hawai'i Pacific University economics professor, agreed that the furlough plan will have a broad negative impact on the local economy.

Laney said he sees some parallels with the mid-1990s, when state government was forced to cut spending in the wake of a prolonged statewide recession.

As in the '90s, it will take a major out-of-state economic boost — either in the form of increased visitor arrivals or new out-of-state investment — before the state's financial picture will get better, he said.