A midnight deadline came and went last night and most state employees still don't have a new contract, leaving unresolved a looming question of whether budget-mandated personnel cuts will come through widespread unpaid furloughs, benefits cuts or hundreds of additional layoffs.

Contract negotiations are ongoing as state employees enter the fiscal year on uncertain footing. Gov. John Lynch briefly joined talks yesterday between his team and leaders of the State Employees' Association, which represents about 9,000 of the state's 11,000 employees. Talks will resume tomorrow.

Union leaders yesterday faulted the governor and his team, saying they lacked focus on the challenge and declined to consider creative suggestions.

"The only reason we are at the eleventh hour and the 59th minute on this is because of their action or, I should say, their inaction," said SEA Vice President Diana Lacey, who leads the union team. She said that from the outset union leaders had wanted to meet every day, rather than twice a week, to speed negotiations.

Lynch said only that he believes both sides want to reach a deal.

"I think everyone wants a contract," he said.

The challenge is large. Lynch signed a new state budget yesterday that requires him to cut $25 million from personnel expenses, a number that could be met through unpaid furloughs, health plan changes or - if all else fails - 500 to 750 layoffs on top of the roughly 200 prescribed in the budget.

Lynch told reporters yesterday that "furloughs need to be a part of that overall process," but he cast doubt on whether voluntary furloughs, which have been pursued by the SEA, would provide enough "certainty and accountability" to be feasible.

"It's difficult for me to see how we can do that on a purely voluntary basis," he said.

Lawmakers who wrote the $25 million cut into the budget estimated it could be reached with 14 furlough days per year by nonessential state employees. According to union officials, the governor's team started out seeking mandatory, across-the-board furloughs of two days per month.

Lacey balked at the idea.

"We don't believe we can get to yes with mandatory furloughs because we know . . . that many employees can't afford that mandatory pay cut," Lacey said.

The tradeoffs are severe, she said.

"You have to weigh trying to preserve upwards of 10 percent of our workforce against layoffs, against the rest of the 90 percent being able to pay their bills, being able to pay their mortgages, feed their kids," she said.

Furloughs or health plan changes must be negotiated with the union as part of the contract, but the executive branch has unilateral power to lay off employees.

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