"An 8 percent cut is unacceptable," Cayetano asserted yesterday.

"My departments have cut themselves to the bone.

"In the last two years, we have cut benefits to people on welfare in half. We eliminated many people from general assistance rolls, from QUEST (health care) by tightening up eligibility. We cut the university.... We cannot experience another 8 percent cut. That's the bottom line."

Even the Department of Education cannot be forced to make such a cut because student enrollment is increasing, Cayetano added. "Unlike welfare, we can't cut children from our schools," he said.

Earlier this week, the Council on Revenues significantly lowered its revenue forecast for the state's next fiscal biennium, which begins July 1, sending shock waves through the administration and the Legislature. The projection by Hawaii's top economists, used in shaping the state's two-year budget, spurred talk of layoffs, furloughs, program cuts, tax increases and partial funding of government workers' pay raises.

But Cayetano is convinced that the council erred is formulating a revenue forecast that is too bleak.

It did not take into account, Cayetano said, his proposal for an accelerated $1 billion construction program during the biennium to bolster the construction industry, which must still be approved by state lawmakers.

Cayetano's fast-track state building program, which would more than double what the state has done annually, is estimated to create 8,500 jobs.

Cayetano said that when he called Prudential Locations, a real estate firm, he was told that the past two months were the best in the last four years for the isle housing market.

Also contributing to his belief that the state is coming out of its economic downturn is that tax collections for the past eight months are running 2 percent above what was collected in the period a year earlier. That's better than the Council on Revenues' 1.2 percent growth forecast.

Cayetano has instructed Business Director Seiji Naya to come up with a different revenue forecast. It could be ready as early as today, Naya said.

Under state law the administration can offer a forecast different from the council's, but it must state the reasons for its projections. The Legislature, however, is not compelled to accept the administration's projections.