Gov. Linda Lingle, in a reflection of the state's softening economy, said yesterday she will impose 4 percent general-fund spending restrictions next fiscal year on all state departments.

The governor described the decision in a memo to department heads on Monday as "cautionary and restrictive to ensure that the state lives within its means."

"Our goal is to achieve fiscal prudence and balance, not only in the immediate time frame but also for the upcoming fiscal biennium," Lingle said.

The restrictions total $33 million for the fiscal year that starts in July and come on top of the $44 million the state Legislature removed last session from the governor's supplemental budget request.

The Republican governor has spoken more optimistically than majority Democrats about the state's economy, even chastising the news media in a speech in April for dwelling on the negative. Aides said yesterday that the governor continues to believe the fundamentals of the state's economy are strong and that Hawai'i is in a better position compared to many states on the Mainland.

The new spending restrictions, aides said, are a recognition that state revenue collections are growing slower than expected.

Last month, the state Council on Revenues reduced its revenue forecast for the fiscal year that ends this month to 3.3 percent, down from 3.9 percent in March. The council lowered the forecast for next fiscal year to 2 percent, down from 4.1 percent.

The downgraded forecast, according to recent estimates from the state House Finance Committee, means $14.4 million less in state money this fiscal year and $137 million less for next fiscal year.

"I'm happy that the governor is taking off the blinders. It's better late than never," said state Rep. Marcus Oshiro, D-39th (Wahiawa), chairman of the House Finance Committee. "We have to make some tough choices and if she is serious about the budget, then my door is always open to her and I will work with her administration in crafting a balanced budget."

Oshiro and other lawmakers said they do not want to alarm people about the economy but said Lingle's rosier portrayal has been contradicted by her own actions. Over the past year, the administration has placed some spending restrictions on state departments and delayed or denied the release of grants-in-aid to nonprofit community groups.

Lingle also was critical of the Legislature last session for not agreeing to her tax relief package and for giving only a token $1 tax refund to meet a state constitutional requirement after consecutive years of substantial budget surpluses. Although Democrats have opposed Lingle's tax relief proposals since she took office, mostly for philosophical reasons, House and Senate leaders explained last session that more substantial tax relief was not prudent given the downturn in the economy.

"I think there is a disconnect," said state Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), chairwoman of the Senate Ways and Means Committee. "She wasn't acknowledging — some of her people were, quietly — but she wasn't acknowledging publicly that the Legislature was on the right path.

"Now, my concern is, it's about time she sort of acknowledged what the rest of us knew and the reality that we were dealing with, but I'm afraid she's going a little bit overboard."

Baker said lawmakers made spending restrictions on departments ranging from 2.5 percent to 5 percent to shield health, public education and human services programs from more significant reductions. She said Lingle's 4 percent across-the-board restrictions could severely cripple some programs.

In her memo to department heads, Lingle said she understands the restrictions will present hardships. The restrictions will apply to discretionary operating expenses from the general fund and the amounts will be known in July when department budgets are released.

The governor told department heads to "guard against unjustified, unintended, or automatic expansion of your budget base" and to look skeptically at spending on new programs.

However, the governor urged departments to speed up spending on capital improvement projects, which some economists have said may serve as a stimulus to the construction sector of the economy.

Lingle also sent letters to the Legislature, the Judiciary and the state Office of Hawaiian Affairs asking for fiscal restraint.

The governor and state lawmakers will start discussions on a new two-year state budget with projections for slower revenue growth and an expectation for increases in collective bargaining costs with public-worker unions.

Lingle warned department heads that the "cautionary stance" will continue into the next budget cycle along with other fiscal measures to safeguard the state's general fund.