Gov. Linda Lingle said yesterday she would use federal economic stimulus money and cuts to wages and benefits to state workers to close the state's budget deficit.

The governor would use federal money meant for public education to plug a $90 million deficit for the fiscal year that ends in June and a combination of federal education money and cuts to wages and benefits of state workers to erase a $165 million gap for the following two-year budget cycle.

Lingle's plan would avoid tax increases and layoffs of state workers and would produce an estimated $160 million surplus at the close of fiscal year 2011.

Cuts to wages and benefits of state workers would have to be negotiated through collective-bargaining with public-worker labor unions. Lingle said she wanted to work with state lawmakers and labor leaders on the budget and noted that New York Gov. David Paterson ordered 8,900 layoffs of state workers after unions fought concessions.

"Not everybody is going to agree with our plan. We know that going in, not everybody is going to be happy with the proposals that we make. But that's the nature of a $2 billion gap. And that's what we've closed during this past year," Lingle said of the state's falling revenue projections during the recession.

NO DETAILS YET

Lingle did not release the details of her proposed wage and benefit cuts but said the state is trying to save as much as $278 million over the next few years, a figure that includes $96 million in adjustments to health benefits the governor discussed earlier this month. Union leaders said they have been told it could be a combination of wage cuts, trims to health benefits, and a reduction in vacation and sick leave days.

"I think our standing opposition remains that it shouldn't be government employees who bear the huge brunt of trying to get the state out of the economic mess," said Randy Perreira, executive director of the Hawai'i Government Employees Association. "Our problems aren't caused by the cost of public employment. They are caused by a bunch of other factors, not the least of which being the lack of tourists that are coming to Hawai'i."

Roger Takabayashi, president of the Hawai'i State Teachers Association, said he had yet to hear details of the governor's proposal.

"We haven't heard it at the table, so basically she's bargaining in the media again," he said.

Takabayashi was also critical of Lingle's plan to use $157.2 million in state fiscal stabilization funds meant for public education to help close the deficit. Lingle said she would use the remaining $35 million of the total $192 million in stabilization money for Hawai'i on a joint education plan for kindergarten-through-12th grade public schools and the University of Hawai'i.

Takabayashi said the federal education money should be used to offset state spending cuts to the state Department of Education over the two-year budget cycle. Otherwise, he said, "the stimulus is not going to do what it was intended to do."

DEMOCRATS OPPOSED

Brian Schatz, the chairman of the Democratic Party of Hawai'i, also said the governor should not use the federal education money for this year's budget shortfall.

"The point of the education funds from the federal government was to sustain our public schools and to prevent harmful cuts, but now it's being used to plug a puka in this year's state budget," he said. "That's not the kind of long-range planning that we need. And it means that the DOE will not have the money it needs for the next two years, which is exactly what the federal money was supposed to be for."

Lingle countered arguments from state schools superintendent Pat Hamamoto and some lawmakers that she is taking the stimulus money away from public education.

"It certainly may affect some plans that she had, but my responsibility is the state of Hawai'i and our overall budget," Lingle said of Hamamoto. "She is very narrowly focused, and she wants more money, and they want more money every year.

"But we have a $2 billion budget gap, so we can't just have more and more money. It just won't work in a year when you're facing a $2 billion budget gap."

While her budget plan would use the federal education money for the deficit, the governor wants lawmakers to restore the recent $30 million in cuts to the DOE in fiscal year 2010 and 2011 and the $35 million in cuts to UH in the state House draft of the budget.

Lingle also said the DOE stands to receive $80 million in additional federal money to help students from low-income families as well as extra federal money for special education programs.

Lingle said she would use $14 million in new federal Medicaid reimbursement money from the stimulus package to help public hospitals on Kaua'i and in Kona and Hilo on the Big Island pay debts to vendors. The administration is working separately with Maui Memorial Medical Center on the terms of a loan so the public hospital can cover its debts and operating expenses.

MENTAL HEALTH AID

In addition, the governor would take $10 million of the Medicaid money for adult mental health services. Social-service providers have warned about the dangers of cuts to mental health programs, citing the stabbing death last month of Wai'anae High School teacher Asa Yamashita at an 'Ewa shopping center by a man with a long history of mental illness.

Lingle said state spending on mental health services had more than doubled since she took office, but she wanted to increase spending to show that it remains a priority.

State Sen. Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights), the chairwoman of the Senate Ways and Means Committee, said Lingle's new plan lacks critical details of how she would achieve the labor savings. Georgina Kawamura, the state budget director, is expected to brief senators tomorrow.

"I'm not holding my breath, because we've asked for specifics before and we haven't gotten it," Kim said. "It's very convenient right now for the governor not to give us the details of $278 million in labor savings because she says they are in negotiations. I have no clue when she'll be ready to give us that.

"But we cannot wait. The budget cannot wait. We have deadlines to follow. We have bills that have to go into conference."