Already facing a deficit approaching $1 billion for the current two-year budget cycle, the state now finds itself $44 million deeper in the hole after the recent discovery of a clerical error in accounting records.

Rather than ending the 2009 fiscal year on June 30 with a positive balance of about $8 million, the state now finds itself in a $36.8 million deficit for that year, Gov. Linda Lingle's office said in a news release.

“;The need for immediate solutions to close the budget gap becomes more urgent than ever,”; Lingle said in a written statement. “;The administration is committed to continue working toward this goal.”;

Legislative leaders said they wanted to know more about the matter before saying too much.

“;I think it's extremely unfortunate, given that in this state of our economy, basically, every single penny is important,”; said House Majority Leader Blake Oshiro (D, Aiea-Halawa).

Senate President Colleen Hanabusa (D, Nanakuli-Makua) declined comment on the error, saying the Senate's money committee would have to examine the matter.

However, she noted, “;it is interesting that we find out this error in the middle of collective bargaining negotiations.”;

The state is at an impasse in contract talks with the Hawaii Government Employees Association, the United Public Workers union and the University of Hawaii Professional Assembly.

In negotiations, the state has argued for steep cuts for public workers to help make up the growing budget deficit.

  Georgina Kawamura, state budget director, said the error was discovered within the last week, and officials worked to immediately identify the source and verify the amount to make a public declaration.

She rebutted the notion that the timing of the disclosure may have been intended to influence union talks.

“;It was nothing malicious,”; she said. “;There was no purposeful issue to it. We found it in the course of what we do every day.”;

There was no immediate comment from union leaders.

Discrepancies resulted from errors in recording tax money collected in the past two fiscal years, the governor's office said.

In fiscal year 2009, $44 million was collected by the Department of Taxation as part of its Delinquent Tax Program. The amount was incorrectly recorded when the Department of Accounting and General Services prepared financial reports for the Budget Office.

The two departments did not coordinate their reporting, Kawamura said, and as a result the $44 million was counted twice.

A similar recording error of $800,000 also occurred for fiscal year 2008.

Because the accounting error technically puts the state in violation of the law requiring a balanced budget, Kawamura said the Attorney General's Office has been advising her department on how to proceed on the matter.

“;(They) advised us that the important thing was to prepare this public declaration,”; Kawamura said. “;That was our immediate responsibility — to let everybody know.

“;We can't change the '09 balance. It is what it is, but working toward filling the budget gap is our No. 1 priority right now.”;

Kawamura said it was too early to discuss what strategies would be pursued to close the gap.

Union leaders have urged the administration to look at raiding special funds, such as the Hawaii Hurricane Relief Fund, or consider a modest hike in the general excise tax.