HONOLULU -- Public worker unions are willing to agree to pay cuts or a furlough as part of their next contract, KITV has learned.

It was just one of the proposals that was discussed behind closed doors in negotiations on Monday. However, the questions remain: Will the state accept or reject the unions' offer?

The state walked out of negotiations, but we have learned the other employers, including the counties, the Department of Education and the University of Hawaii came close to making an agreement with the state's largest unions.

Sources told KITV that union leaders proposed a one-day a month furlough or a 5 percent pay cut for public employees in discussions held behind closed doors at Honolulu Hale for an hour and a half on Monday. The discussions were unofficial and do not represent a formal proposal so they are subject to change.

The head of the state's largest public workers union was tight lipped about the talks.

"We are not in a position to confirm any of the content of the discussions with the employer group yesterday. The discussion was off-record with the mediator," Hawaii Government Employees Association Executive Director Randy Perreira said.

The parties initially agreed to no cutbacks in health benefits for public workers as part of a two-year contract that would be retroactive to July 1, sources said.

"This was a discussion that the unions initiated, and the ideas put forth were those that came from the four unions collectively," Perreira said.

The state's mayors told union leaders they will not need to furlough any employees in the next 12 months, sources said. Honolulu, for example, raised property taxes and fees this year to meet rising expenses and lower revenues.

However, starting in July 2010, counties may need to cut employees' pay or begin furloughs. That is because property values are declining. The City and County of Honolulu expects at least a $120-million budget shortfall starting next summer.

Union representatives said they feel Gov. Linda Lingle will reject the proposal because a 5-percent salary cut or a one-day a month furlough will not be enough to solve a state budget shortfall that the governor said has now ballooned to $823 million, sources said.

The governor originally wanted to furlough state workers three days a month, amounting to a pay cut of at least 14 percent. That is three times as much as what the unions proposed Monday.

The unions also want the state to tap into its Rainy Day Fund and the Hurricane Relief Fund and allow early retirement for public employees to help narrow the budget gap and keep pay cuts to a minimum.

The state must agree on any contract. So even if the counties, the University of Hawaii and the Department of Education reach agreements with unions, and the state does not go along, there is no deal and the proposal will not proceed to ratification votes by the rank-and-file members.

No negotiations were held Tuesday. The unions said they hope to meet in the next couple of days.