Gov. Linda Lingle, anticipating that state revenues will decline when the state Council on Revenues updates its forecast next week, yesterday ordered state departments to make an additional 2 percent cut in discretionary spending to get through the fiscal year that ends in June.

The new cut would save an estimated $36.3 million. Lingle had imposed a 4 percent spending restriction last summer and a 2 percent trim in January to adjust to falling revenues.

The state Council on Revenues has estimated that revenues will decline 5 percent this fiscal year, but actual collections through 10 months are 6.8 percent below expectations. The council is widely expected to lower the forecast when it meets next week.

"Due to the Legislature's unwillingness to pursue alternative, fair and reasonable solutions for closing the budget shortfall during these unprecedented economic times, we are forced to apply additional spending restrictions across all state departments at this time, on top of the prudent restrictions that were already implemented over the past year," the governor said in a statement.

The Lingle administration had wanted to use money from the state's rainy day fund to help close the deficit this fiscal year, but lawmakers denied her request. The administration also wanted to use federal stimulus money meant for public education for the deficit, but lawmakers instead spread the federal money out over the following two-year budget cycle to help offset state spending cuts to education.

The Lingle administration's proposal for the federal education money caused conflict with state schools Superintendent Pat Hamamoto and the state Board of Education. But the administration has quietly dropped the plan after lawmakers would not agree to swap the federal education money for a corresponding reduction in state general-fund money.

Georgina Kawamura, the state's budget director, said the new 2 percent discretionary spending cut is prudent.

"We're trying to anticipate it going down," Kawamura said of the revenue forecast, "just bracing ourself for that and trying to be proactive in our planning."

Projected state revenues have been off by more than $2 billion since last year. The Lingle administration believes it now has enough options available to get through the last month of fiscal year 2009 unless the council dramatically lowers the forecast.

State lawmakers also built a cushion into their fiscal year 2010 and 2011 budget that assumes revenues will decline by more than the 5 percent projected by the council.

While the cushion would help, it may not be enough to totally absorb the decline in revenue and could lead to another round of spending cuts by the administration and an adjustment by lawmakers during next year's session.

Public-sector labor unions are also watching the council's forecast because of the potential impact on collective bargaining. The administration and union leaders have been discussing possible furloughs and adjustments to healthcare benefits to reduce labor costs.

State House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo Valley, Wilhelmina Rise), said the governor should not blame lawmakers for the need for new spending cuts.

Say said lawmakers wanted to preserve the state's rainy day fund as an option for the deficit in the event the budget situation worsens. Lawmakers, however, did agree to spend money from the rainy day fund to help public hospitals in the Hawai'i Health Systems Corp. operation and for adult mental health services.

Say said lawmakers did not agree with the governor's plans for the federal education money because the money is conditioned on the state meeting specific education benchmarks. Using the federal money to help close the deficit, instead of helping public schools, might cause the state to miss the benchmarks.

Say said he is also concerned about the impact of furloughs on public schools and the University of Hawai'i and urged the governor and labor unions to resolve the issue in advance of the next school year.

"There's no one to blame here at this point in time," Say said of the state's revenue loss. "This whole mess is created by Wall Street, with the global meltdown of the subprimes (mortgage industry) and then to the stock market."