The economic crisis continues to stagger Hawaii's tourism industry, and the drop in revenue threatens to shrink state government just as the need for public assistance grows. The administration and public-employee unions locked in negotiation need to agree soon on how to meet the challenge over the duration of the recession.

Union leaders said less than a month ago that the Lingle administration threatened to impose furloughs of up to 37.5 days over the next two fiscal years or face unilateral action by the administration. A sharp decrease in expected visitor expenditures since then could result in more cutbacks.

Anticipating a drop in Hawaii's tax collection, Gov. Linda Lingle ordered a week ago that state agencies cut their budgets by $36.3 million by stopping all discretionary spending. The state had planned before then for a 5 percent drop in revenues, but actual tax collections are coming in at minus 6.8 percent. The Council on Revenue is to reveal projections this week.

Those revenue dips reflect a severe downturn in the state's tourism industry. Visitor expenditures for the year now are expected to decline by 7.9 percent, according to the state Department of Business, Economic Development and Tourism.

Lingle and the Legislature have been at odds over how to cope with the recession. The Republican governor has called for tightening the state's budget while Democratic legislators overrode her vetoes to increase the hotel room tax and income taxes for the wealthy.

Lingle said she is forced to “;apply additional spending restrictions”; because of “;the Legislature's unwillingness to pursue alternative, fair and reasonable solutions for closing the budget shortfall.”;

Amid the gloom, the tourism industry hoped that the swine flu outbreak in Mexico would result in Americans redirecting their vacation plans to Hawaii. While that and travels deals did help slow the decline in domestic arrivals, the flu concerns caused a sizable drop in Japanese visitors to the islands, with cancellations stretching into June.

Public employee unions have won pay raises ranging from 16.5 percent to 29.6 percent in the past four years. Those have resulted from binding arbitration following failures of the administration and the unions in agreeing to a compromise.

That strategy will not serve the public employees well as the recession continues. If locked by contract to a modest wage increase or even a freeze, the state may need to rely on furloughs or layoffs to abide by the constitutional mandate of a balanced budget.