"If at all possible, we would not like to see that happen," said Senate Ways and Means Co-Chairwoman Lehua Fernandes Salling.

But, added the panel's other co-chairwoman, Sen. Carol Fukunaga, "There are no sacred cows. Everything is on the table. There's no magic bullet at this point."

By raising the specter of layoffs, Fernandes Salling and Fukunaga went further than House Finance chairman Calvin Say, who has said the state may have to impose unpaid leaves on state workers.

Fernandes Salling and Fukunaga said yesterday that layoffs cannot be ruled out because they are asking every state department to slash its budget by 8 percent in each of the next two fiscal years. It may be hard to achieve that goal without layoffs, although "initially we did not want to touch warm bodies," said Fernandes Salling.

The latest shortfall, said Fernandes Salling and Rep. Galen Fox (R, Waikiki), an economist, underscores the need to reduce the size of state government.

The $275.5 million shortfall is the result of the lower tax revenue forecast by the Council on Revenues for the fiscal biennium that begins in 3-1/2 months.

Budget Director Earl Anzai, who noted that the administration has had to cope with earlier shortfalls totaling $400 million, said, "Everyone should understand we are not out of our fiscal crisis yet."

Even the usually protected Department of Education faces the chopping block, said Fernandes Salling and Fukunaga.

Other areas that could be cut, said the two senators, are workers' pay raises and Gov. Ben Cayetano's tax break proposals for the hotel and construction industries and increased spending for prisons and ocean protection.

Some departmental officials were wondering if they can meet the 8 percent budget cut the Senate is seeking. "We're pretty lean already," said agriculture spokeswoman Ann Takiguchi.

John Radcliffe, associate executive director of the University of Hawaii faculty union, said the Legislature shouldn't lower the collective-bargaining pacts. "We hope they'll honor the commitment," Radcliffe said.

Here's how some officials reacted to the proposed 8 percent budget cut:

Department of Education: The department will be reviewing whether to eliminate the A+ after-school program, established by Cayetano when he was lieutenant governor, because it is noninstructional and essentially entails child-care, said Board of Education chairwoman Karen Knudsen.

Other options include increasing class sizes rather than cutting instructional programs, she said.

Knudsen said she doubts if the school system's administration - which has shrunk to 600 from about 900 - can shrink any further.

Human Services: The 8 percent cut - $47.7 million in the first year of the biennium and $50.1 million in the second - can be covered by eliminating temporary assistance to the needy, which includes aid to legal immigrants, said Deputy Director Kate Stanley. But Attorney General Margery Bronster has issued an opinion that the program shouldn't be axed, Stanley said.

Budget and Finance: Anzai said it will be extremely difficult for his department to reach the 8 percent benchmark because his budget carries much of the state's "fixed" costs and entitlements - such as $436 million in debt service, $241 million in pension payments and $207 million in health fund payments - that can't be cut.

Commerce and Consumer Affairs: Director Kathryn Matayoshi said she will try to get more of her budget funded by special funds - it is already at 80 percent - to alleviate the need for money from the cash-strapped general fund.