Gov. Linda Lingle cautioned yesterday that a second round of layoffs because of the budget deficit would require a fundamental restructuring of state government, but she would not discuss the number of state workers who could lose their jobs or other specifics.

The governor, in a live webcast from her office at the state Capitol, instead described the guiding principles she would use when making further spending restrictions and layoffs to help close a budget deficit she estimates at $884 million through June 2011.

Lingle has already ordered 1,100 layoffs of state workers starting in November and has warned for weeks of a second round of layoffs as state tax revenues continue to decline. The governor has sought $688 million in labor savings in contract talks with public-sector labor unions.

Her remarks yesterday were on the eve of a binding arbitration hearing this afternoon with the Hawai'i Government Employees Association, the state's largest public-sector union.

"All of us, including government, religious, business and community leaders, need to recognize the significant loss of revenues we have experienced and acknowledge that we cannot afford the same level of government services we have enjoyed in the past, nor the same number of employees we now have on the payroll," the governor said.

Lingle said she would attempt to avoid further cuts to the state Department of Education and the University of Hawai'i, but suggested that educators avoid using money from the general fund to pay for some educational services.

The governor said the state would eliminate programs that could be administered by the federal government, the counties or volunteers.

Lingle said she would also roll back public-assistance benefits for the needy that were expanded when the state's economy was stronger. She plans to consolidate administrative functions in state departments to reduce duplication.

UNION RESPONSE

Randy Perreira, the HGEA's executive director, said state workers recognize the significance of the budget shortfall and have proposed concessions. Last week, the governor rejected the union's counter-offer to the state's latest contract proposal and broke off negotiations.

"But we would hope that we all continue to work toward finding a community solution, because this is in fact a community problem," he said.

Lingle, who opposed tax increases passed by the state Legislature last session over her vetoes, said yesterday that additional tax increases would be ineffective.

The governor said tapping special funds such as the state's hurricane relief fund would be a one-time move that would only partially address the revenue shortfall and leave the fund depleted.

Lingle said a higher-than-average number of state worker retirements this year or incentives for early retirement would not cover the deficit, since the state would have to pay out for retiree vacations and benefits, hire new workers to replace some of the retirees, and offer bonuses to workers who retire early.

"The only immediate way to reduce our growing budget deficit is to reduce our overall spending now," she said.

But Perreira said the governor, rather than dismissing each of the ideas individually, should look at the suggestions as part of a package.

"Using a package of solutions, I think, brings us a lot closer to where we all want to be, and that's to kind of restore some fiscal sanity and economic stability to the state," he said.

Perreira said union workers are struggling like everyone else because of the poor economy. He urged the governor to return to the negotiating table.

"We don't have time for webcasts and these kinds of — no offense — these kinds of media shows," he said. "Our interest is just trying to come to a solution that's best for all in the community."

'EXASPERATED'

State Rep. Marcus Oshiro, D-39th (Wahiawa), the chairman of the House Finance Committee, said he thought Lingle's address was timed to influence public opinion before binding arbitration.

"On the eve of going into arbitration, I thought it was an act of desperation to again negotiate in the media," he said.

Lingle criticized state lawmakers for what she described as "multiple and repetitive" legislative briefings on her spending cuts and layoff plans. She said the briefings do not address the deficit and detract from the work of her Cabinet directors.

Oshiro, who has attended several of the oversight briefings, said lawmakers have been "dumbfounded and exasperated" by explanations from department directors of how the administration arrived at the budget cuts.

"There seems to be no rhyme or reason or rationale for how she identified these employees or these programs," he said, citing layoffs of agriculture inspectors and most of the state's film office.

Oshiro and other lawmakers said Lingle should expect scrutiny if she uses the spending cuts and layoffs to fundamentally restructure government.

"We live in a democracy. We have the responsibility of oversight, to understand, to comprehend the impact of these layoffs on our constituents," he said. "We would be remiss if we did not ask the governor, 'What was the methodology? What was the rationale?' "

Garrett Toguchi, chairman of the state Board of Education, said he was pleased to hear the governor say she would try to avoid further cuts to public education. He said additional cuts would be "catastrophic."

"However, given the severity of this fiscal crisis, I'm disappointed that Gov. Lingle is not considering tapping into the dormant Hawaii Hurricane Relief Fund to help our schools and close the budget gap," he said in a statement.

Lingle chose to address the public through the live webcast rather than at a public event or news conference. The governor was not available afterward to answer questions from the news media. The webcast, posted on the governor's and The Advertiser's Web sites, had technical glitches that prevented many viewers from watching it live.