HONOLULU -- Four employee unions and the state have fewer than two weeks to come to an agreement on how to cut $688 million n spending to ease the budget deficit.

Representatives from the Hawaii Government Employees Association, Hawaii State Teachers Association, United Public Workers and University of Hawaii Professional Assembly met with state negotiators and a federal mediator Wednesday to discuss everything from furloughs, to salary cuts and layoffs.

The governor has said she will begin furloughing workers in July for three days a month.

The three-hour meeting was preliminary to ensure that all parties are willing to work toward a resolution. Signs indicated the battle is heating up between the governor and the unions.

Representatives of the state employee unions and state negotiators emerged from the meeting smiling.

"I think it was productive and certainly I think both sides are optimistic that at the end of this, I think we'll come up with something everybody can live with," HGEA Executive Director Randy Perreira said.

The HGEA, HSTA and the UPW filed legal challenges Tuesday, to prevent the governor from implementing the three furlough days a month. It would mean a 14 percent pay cut for state workers.

"Given the magnitude of the shortfall, it's unfair and just unaffordable for the employees to bear that total cost," Perreira said.

Gov. Linda Lingle claimed that without the furloughs the state would have to lay off some 10,000 state workers to close the deficit.

The state and counties made some official proposals Tuesday.

HGEA, the state's largest public sector union confirmed it has received several offers. Union representatives would not release details and said they had not fully reviewed the proposals. They said they are willing to make some concessions.

"By and large our members have made it clear that they're willing to do so," Perreira said. "The problem they face is that the cuts that have been suggested by the state are unaffordable and would drive people into bankruptcy."

Although the Department of Education does not face furloughs, it does face budget cuts equivalent to the furloughs.

HSTA President Roger Takabayashi bristled at the possibility of pay cuts for teachers making an average of $45,000 a year.

"It's quite devastating. There's going to be a tremendous impact to the community as well because they won't have discretionary money to spend at the local vendors and so on," Takabayashi said.

The HSTA, UPW and UHPA have not yet received official proposals, officials said.

All union reps are on call with no other negotiating sessions scheduled right now.

KITV asked Lingle if the state is prepared to take the pay out of employee paychecks.

"The process is in place. We are ready to start on July 1," Lingle said. "There are two different types of employees depending when they started in government and how they are in our payroll system, but they would feel it in either the second check in July or first check in August."

The governor said she would hold a news conference on Thursday to discuss the state's plan for furloughs.

Employees may be offered furlough banking, or the option of taking unpaid vacation, she said. Workers will not be furloughed at prisons, the youth correctional facility or state mental hospital, Lingle said.

The Hawaii Government Employees Association has applied for a permit to hold a rally on June 30 at the state Capitol.