Gov. Linda Lingle said that state government, businesses and nonprofits are in for a tough 2009 because of the economic downturn.

Lingle, campaigning in Ohio for Republican presidential candidate John McCain, also said in a telephone interview Thursday that early talks on the next teachers contract are threatened by continued intransigence on random drug testing by the teachers union.

The Council on Revenues on Wednesday revised its revenue projections for the current fiscal year from a 1 percent increase to a one-half percent decrease. That means the estimated deficit has risen from $155.4 million to about $230 million. The council also reduced revenue growth projections for the following two fiscal years.

Lingle said the council's new forecasts will force "adjustments" in state spending, a restructuring of debt and the use of special funds to balance the budget. She also expressed concern about nonprofit organizations weathering the downturn.

"I'm anxious for the election to get over and for the Legislature to elect their leadership so we can sit down (and) begin the discussion between us" and the community, she said. "Clearly, we cannot maintain this level of spending."

The governor added that this "can't be a time of fingerpointing. None of us caused this situation. We didn't cause the run-up in the price of oil or the financial crisis, but we're going to have to deal with the results of that."

Lingle already had ordered executive branch agencies to draft budget cuts of between 10 percent and 20 percent. She is due to release a proposed budget for the next two-year cycle in December.

State Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), chairwoman of the Senate Ways and Means Committee, said she is wary of using special funds to help prop up the state's general fund, citing a court decision on one such fund that barred its use in that manner.

There are signs that the winter tourism season may improve due to Japanese tourists attracted by favorable exchange rates, she added.

Still, said Baker, "We are going to have some belt-tightening to go through." She added that capital spending projects need to be speeded up.

Republican Sen. Fred Hemmings (Kailua, Waimanalo, Hawai'i Kai) also warned against using special funds. But the Ways and Means Committee member said the Department of Education should be audited and restructured, and that some government operations should be privatized without causing layoffs.

"Right now, if I mentioned the word privatization in the state Capitol, I would be vulnerable to assassination," he said jokingly. The parties have to be "very innovative so we will not have to lay off public sector employees."

In the telephone interview, Lingle also commented on her decision to release state funds for the last round of teacher pay raises under the current contract. She did so even though random drug testing of teachers, which she pushed for, has not been implemented.

Lingle said she released money for the raises despite the unresolved drug testing issue because it is to be resolved by the state Labor Relations Board.

The board is reviewing whether the current contract requires testing to begin. The teachers union says it will agree if the exams are limited to incidents where there is reason to suspect drug use.

On Thursday, Lingle said early talks on a new contract are unlikely to progress unless the testing issue is resolved.

"Until we have someone we can trust as a negotiating partner, it's going to make it very difficult for us to begin the next round of negotiations," the governor said. "So if (union leaders) are not being sincere, they risk jeopardizing the next round of negotiations for their members."

In response, Roger Takabayashi, president of the Hawaii State Teachers Association, said the union chose to honor the directive of Labor Relations Board chair Jim Nicholson.

"He asked both sides not to make comments or negotiate in the media," Takabayashi said.

"It is unfortunate that the governor is making these comments from Ohio and would resort to name calling and rhetoric in the media rather than working with us to resolve this at the table," he said.