The state House Finance Committee agreed to a budget draft yesterday that would significantly cut spending in state departments and eliminate three state programs and 374 state jobs.

The draft, which now goes to the full House for approval, would cover about two-thirds of the shortfall in the two-year budget. Separate bills that would raise taxes and divert additional revenue to the state's general fund, approved by the House this week, would close the remaining one-third of the gap.

State Rep. Marcus Oshiro, D-39th (Wahiawa), the chairman of the House Finance Committee, erupted yesterday over Gov. Linda Lingle's comments that tax increases should be off the table and that the state can avoid laying off workers.

Oshiro said Democrats had thought they were working collaboratively with the Republican governor. "It all depends on whether the governor takes her head out of the sand and starts to evaluate the budget honestly and face the effects as they are and not as she would wish them to be, and work with us," he said.

With the state Council of Revenues expected to lower its forecast this afternoon, causing what Oshiro described as "another shock wave," Lingle will likely be forced to make immediate adjustments to the budget for the fiscal year that ends in June. The governor is expected to work with lawmakers over the next several weeks on changes to the two-year budget.

Oshiro said he was upset after hearing Lingle's comments on the budget yesterday morning on the Perry and Price radio show on KSSK. "I thought that we were working together and that all options were on the table," he said.

Aides to Lingle said the governor did not say anything new yesterday. Lingle said last week that it would be a mistake for lawmakers to raise taxes in the weakened economy. She has, from the start of budget talks, said the state should avoid layoffs if possible.

"She reiterated her point that this is not the time to raise taxes on either people or businesses in the state of Hawai'i," said Linda Smith, the governor's senior policy adviser.

3 PROGRAMS WOULD END

The budget draft backed by the committee yesterday contains $10.3 billion in overall state spending for fiscal year 2010 — $799.6 million less than Lingle first proposed in December — and $10.4 billion in fiscal year 2011 — $892.1 million less than the governor recommended.

For general-fund spending, over which lawmakers have the most discretion, the budget is $5.1 billion for 2010 — $235.8 million less than the governor recommended — and $5.2 billion for 2011 — $170.5 million less than the governor proposed.

The draft recommends that the state end three programs: the Disability and Communications Board in the state Department of Health; the Planning and Development Agency in the state Department of Health; and the Career Kokua program in the state Department of Labor and Industrial Relations. In all, 374 jobs would be eliminated.

The draft does not include all of Lingle's updated budget proposals from last week to close the $650 million shortfall, but it does have the $320 million in federal Medicaid funds from the federal economic stimulus package.

The draft also does not account for what the council might do today, which could be significant. For example, the council's existing forecast is for a 3 percent revenue decline for this fiscal year. Yet the state Department of Taxation has marked a 6.4 percent decline through the first eight months.

The House Finance Committee also recommended a 20 percent cut from the state Office of Hawaiian Affairs and a 23 percent cut from the state Judiciary.

The House draft of the budget is expected to be sent to the state Senate next week.

Lingle's budget update, which also does not account for a new council forecast, avoided layoffs but sought cuts to health benefits for state workers that would have to be negotiated with public-worker unions through collective bargaining. The proposed layoffs in the House plan are not subject to the negotiations.

PLAN 'DID NOT BALANCE'

Randy Perreira, executive director of the Hawai'i Government Employees Association, said he is disappointed that the House is recommending layoffs but blamed it in part on Lingle's budget not fully adding up. He said he appreciated that lawmakers are also considering revenue-generating options instead of closing the shortfall solely through spending and benefit cuts.

"They took a look at the budget, and what we all could see was that the governor's plan did not balance. It was based on some faulty and some perhaps ambitious premises in terms of where money would come from — some risky assumptions, if you will — and their method of attempting to balance the budget now is to cut bodies," he said.

State Rep. Gene Ward, R-17th (Kalama Valley, Queen's Gate, Hawai'i Kai), who serves on the House Finance Committee, said the committee's draft is premature. He also criticized Oshiro for blowing up on Lingle, since lawmakers and the governor will likely have to collaborate on budget talks as the session continues.

"We've gone for the jugular, and we haven't even got the headlock in, you know," Ward said. "When everything is on the table, you don't have to take it to the extreme right away. You have to look at what's on the table. You have to analyze what's on the table. You've got to add up the numbers and see if you've got enough on the table.

"And then, and only then, do you say, 'Look, we're going to have to start cutting warm bodies, No. 1. No. 2, we're going to have to start raising taxes,' " he said. "But instead of doing that and taking the inventory, they've gone directly to the jugular."

State Rep. Tom Brower, D-23rd (Waikiki, Ala Moana), who also serves on the committee, said the governor and her aides have had more than enough time to suggest to lawmakers how to balance the two-year budget.

"The governor's told us what's not acceptable, but she hasn't told us what is acceptable," he said. "The House plan, which I support because we can amend it, is one option. Hopefully, there won't need to be any layoffs, but everything needs to be on the table."