Throwing Gov. Linda Lingle's plans to close the state's budget deficit into doubt, a Circuit Court judge ruled yesterday that the governor does not have the authority to unilaterally order furloughs for state workers.

Circuit Judge Karl Sakamoto determined that furloughs alter the hours and wages of state workers and are subject to collective bargaining granted by the state Constitution.

Lingle had ordered state workers to take three furlough days a month for two years starting this month and said she would make equivalent spending cuts at the state Department of Education and the University of Hawai'i to save $688 million and help close a deficit she estimates at $730 million through June 2011.

Sakamoto yesterday found that Lingle does have the authority to restrict state spending at public schools and the university.

Lingle, who had warned of mass layoffs if her furlough plans were blocked, said last night that she and her Cabinet would work through the weekend on how to respond. The governor did not indicate whether she would continue to try to defend her furlough plans in court.

"We will be working on two tracks throughout the weekend to close the budget shortfall. We will continue to negotiate labor contracts to achieve the savings we need to secure a balanced budget, as required by our constitution," she said in a statement. "We also will be continuing to identify additional savings from all state departments.

"I continue to believe that we must approach this unprecedented fiscal challenge with a sense of shared sacrifice in the short-term, while remaining focused on our long-term economic future."

Sakamoto granted a request by the Hawai'i State Teachers Association and the United Public Workers for a temporary restraining order and the Hawai'i Government Employees Association's request for a preliminary injunction. The unions have also sought permanent injunctions.

The unions had asked the court to find that new layoff procedures should be subject to collective bargaining. Sakamoto said the request was premature because the governor has not ordered layoffs.

NEW ROUND OF TALKS

Union leaders said they were gratified by the court's ruling, which affirmed the state's constitutional right to collective bargaining, but acknowledged it would not solve the larger problem of the budget deficit. The unions believe the deficit is smaller than Lingle projects — the state House estimate is $660 million — but significant enough to require state workers to sacrifice at the bargaining table.

Randy Perreira, the HGEA's executive director, said the unions would contact a federal mediator about initiating a new round of contract talks with the Lingle administration.

"We're obviously pleased with the ruling but at the same time we'll note that the ruling does not solve the problem that we all face," Perreira said. "And we are ready and willing to be bargaining with the governor in an attempt to try to resolve at least our share of the revenue shortfall that the state faces."

Union contracts for the HGEA, HSTA, UPW and the University of Hawai'i Professional Assembly expired on Tuesday. Sakamoto ruled that existing contract provisions cannot be changed by the state while the parties negotiate.

"We are hoping that the governor will now bargain in good faith without further threatening layoffs," Perreira said.

FALLING REVENUES

At the court hearing, Herbert Takahashi, an attorney representing the HSTA and UPW, argued that collective bargaining rights would be meaningless if the governor was able to unilaterally order furloughs or cite a poor economy as a reason to bypass negotiating. He said if the governor could "suspend collective bargaining whenever there is a budget shortfall, the right would exist only in good budget years."

State Attorney General Mark Bennett, representing Lingle, said state labor law gives the governor the authority to determine the methods, means and personnel to conduct state operations and take actions that may be necessary in cases of emergency.

Lingle has described the budget deficit as a fiscal emergency but she has not officially declared a state emergency, such as after a natural disaster or terrorist attack. Projected state revenues have fallen by more than $2.7 billion over the past year because of the recession, leading the governor and the state Legislature to impose significant state spending cuts. The Legislature, over the governor's vetoes, also approved several tax increases to generate new revenue.

"The facts are undisputed. We are facing, in this nation and this state, a global economic crisis unknown since the Great Depression," Bennett told the court. "In Hawai'i, we have an unprecedented multibillion-dollar revenue shortfall."

But Sakamoto said state labor law does not define what constitutes an emergency.

"This is not an act of war. This is not an act of natural disaster. And it's unclear, at this point, whether the emergency that is being put forth outweighs a constitutional violation that this court has found," he said.

Bennett also told the court that Lingle's authority to furlough should first be heard by the Hawai'i Labor Relations Board.

Sakamoto, however, said unions had the right to come to court because Lingle gave just a month's notice on furloughs. The governor announced her furlough plans in June and the first furloughs were set to start on Monday. The judge said the court had to intervene to stop a constitutional violation.

"Today could have been the end of collective bargaining for public employees," said J.N. Musto, UHPA's executive director. "But instead of that, it was exactly the opposite. It was an affirmation of our constitutional right to bargain. And for that I am most pleased."

SIGN OF DISRESPECT?

The court ruling was also an emotional victory for labor. Thousands of state workers rallied at the state Capitol on Tuesday, contending that a combination of furloughs and higher health care premiums would be too much of a financial burden during a recession. The governor's furlough plans were equivalent to a 13.8 percent pay cut, while health care premiums could rise by as much as 23.7 percent.

Blue-collar state workers, in particular, worried about the financial impact. "No doubt the governor's plan to implement furloughs would have directly and severely affected our members," said Dayton Nakanelua, UPW's state director.

Many workers also said they felt Lingle's unilateral order was a sign of disrespect, both to the collective bargaining process and their value to the state.

Sakamoto said the governor's furlough plans strike at the heart of state workers' livelihood.

"The nature of a 13 to 15 percent cut in these wages sets in motion changes of jobs, failure of workers to make rents, mortgages, failure of ... families to pay tuitions, to pay their loans, creating bad credit ratings, and cascading effects from these events," he said.