If Cayetano refuses, the state could face a legal challenge from the Hawaii Government Employees Association, Executive Director Russell Okata said yesterday.

Cayetano has said the payroll lag reduces the likelihood of furloughs or layoffs.

Unlike unions representing university professors and public-school teachers which are considering lawsuits challenging the lag, HGEA is pondering a court action that would only require the state to negotiate the schedule delaying paychecks.

HGEA believes the payroll lag is covered by the collective-bargaining law, so it must be negotiated.

Officials from United Public Workers, the union for prison guards, have been in discussions with HGEA leaders and could be joining an HGEA challenge, Okata said.

Under the administration's pay schedule for the first 81/2 months of next year, when the lag will be in effect, workers would be paid only once during February, union leaders note. State workers are normally paid every two weeks.

The schedule jeopardizes the ability of state employees to cover their mortgages and other living expenses, Okata added.

"They'll just have one check to pay their monthly expenses in February," Okata said. "It'll have tremendous consequences not only on our members, but on every creditor of an HGEA member."

Under the plan devised by the Department of Accounting and General Services, state workers would be paid one day later each pay period until a two-week lag - the equivalent of one pay period - is achieved.

The payroll lag also allows the state to convert to a system in which workers will be filling in their timecards after completing their two-week work period. Presently, they turn in their timecards before finishing the work period.

"The payroll lag will impose some hardship on our employees," Cayetano has conceded. "The January 1997 start-up will help employees prepare for the change."

HGEA is suggesting that the payroll lag be done on one day. The last pay day for this fiscal year, June 30, 1997, would simply be moved one day to July 1, 1997, the start of the next fiscal year.

That would mean state workers would get a third pay check in July, Okata said.

The union's plan is based on the assumption that the state's revenue picture will be brighter.

State officials, however, are not convinced this is the best route because it also does not move the state to an "after-the-fact" payroll system, which would solve the problem of overpayments.

Budget Director Earl Anzai said given the budget problems, the state is counting on the savings for this fiscal year, not the next. "Without it, we're in serious trouble," he said.