The state's chief negotiator charged with hammering out a new union contract with state employees said yesterday that he hopes to seal a deal within a week, but it's difficult for the state to offer either long-term promises or contract sweeteners amid an ongoing recession and severe budget crunch.

The challenge facing Assistant Secretary of State Tom Manning is eight figures large: The newly passed two-year budget requires the executive branch to lop $25 million over two years off of personnel expenses, either through unpaid furloughs, benefits cuts or - if all else fails - several hundred layoffs on top of the roughly 200 specifically laid out in the budget. Gov. John Lynch, a Democrat, has repeatedly described layoffs as his least-preferred option.

"Our priority is not to lay people off," Manning said. "And the unfortunate fact is that the Legislature has tasked us with achieving $25 million over the (two-year budget) in general fund savings through personnel costs."

The old contract for the State Employees' Association, which represents 9,000 of the state's 11,000 employees, ended at 12:01 yesterday morning, and negotiators for the union and the state still haven't agreed on a new one.

For now, employees will work under the provisions of the old contract while negotiators continue to hash over a contract and how to make a $25 million cut. The two sides will meet again today. While furloughs and benefits cuts must be negotiated with the union, the executive branch has unilateral power to conduct layoffs.

Manning, a veteran negotiator, said this year is extraordinary in that in previous downturns, "there was always some light at the end of the tunnel," so negotiators could promise state workers a future boost. But this year, amid the "worst condition since the Great Depression," no one's sure things will be better during the next budget.

"The next round may be worse," he said.

Another unusual factor in this negotiation is that legislators passed the $25 million requirement as part of the budget. "Normally you have some objectives, but they're not statutory," he said.

Chief union negotiator Diana Lacey has previously said that because thousands of SEA members vote on the contract, the deal has to include some kind of sweetener to win their support.

Manning said yesterday: "There's not a lot of sugar around these days, and that's a problem people really have to recognize. Basically what we're offering is jobs," he said, noting the size of the $25 million cut.

Union leaders have pitched the concept of a voluntary unpaid furlough program, with employees taking unpaid days as they choose, but Lynch told reporters this week he questions how the state can be assured of meeting the $25 million hard target "on a purely voluntary basis." State negotiators originally sought furloughs of two days a month, or 24 days a year, according to union officials.

At this point, Manning said, the state is seeking furloughs that amount to "under 5 percent" of pay; a 5 percent furlough would equal about 13 working days. Manning noted that as part of their old contract, state employees received a 5.5 percent pay raise in January. At the time they proposed the $25 million cut, legislators estimated that the money could be made up if nonessential employees took 14 unpaid furlough days per year.

Manning didn't close the door to voluntary programs, saying the state would "like to do as much as we can voluntarily," and he said there could be a mechanism for the state to figure out how much savings voluntary programs achieve. He declined to describe the state's proposed mechanism.

Union leaders have said they've offered up an innovative benefit concept that would allow employees to opt out of state health insurance in exchange for an educational benefit.

Manning said that plan won't get the state closer to the bottom line. "We think we actually lose money on that," he said.

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