Gov. Linda Lingle wants to begin meeting with county leaders to talk about shifting some state responsibilities to the counties.

"It's causing some anxiety," said Honolulu City Council budget chairman Nestor Garcia.

Garcia and other county council members on the executive committee of the Hawaii State Association of Counties are expected to meet soon with the governor to discuss her proposal.

With the Hawai'i economy still in the doldrums, the state is wrestling with a $1 billion shortfall that's resulted in layoffs, furloughs, reduced school days, tax increases and other consequences.

The counties, in dealing with their own budget troubles, have implemented hiring freezes, tax and fee hikes, and reduced services, but have not called for layoffs or furloughs, at least not for the fiscal year that began July 1.

In a Web address to Hawai'i residents last month, Lingle said one way she intends to reduce the state's budget deficit is to "eliminate some programs and services that can be effectively administered at the federal or county level, or that can be handled by volunteers."

That statement prompted Garcia to send a letter to Lingle seeking clarification: "As you are well aware, the City and County of Honolulu also faces serious budget challenges and I am very concerned that an unintended consequence of your actions will result in unfunded mandates to the counties."

Lingle, in a response dated Sept. 17, told Garcia she wants to meet with the HSAC executive committee "to identify areas where we can maintain or improve service delivery while minimizing the financial costs to state and county taxpayers."

While the letter does not propose any specific transfer of functions, Lingle wrote that areas of discussion could include "maintenance of our parks and roadways, providing services to the homeless and those seeking private rental housing, and revenue collection activities."

In Hawai'i, there are both state and county parks, and roads and agencies dedicated to those facilities.

For instance, the H-1 Freeway and He'eia State Park are state-run, while Beretania Street and Kapi'olani Park are maintained by the city.

There are also both state and county agencies devoted to helping the disadvantaged and to collecting taxes.

Garcia said he and other council leaders discussed Lingle's letter at an HSAC executive committee meeting last week.

Kaua'i County Councilman Derek Kawakami, HSAC president, agreed to schedule a meeting with Lingle in the coming weeks, Garcia said.

Garcia, HSAC vice president, said the council members are amenable to a meeting with Lingle but "obviously we're concerned about the financial impacts," he said.

The Hannemann administration has already warned that Honolulu's operating budget will be at least $140 million short for the fiscal year that begins in July 2010, Garcia said.

The city's primary source of income is property taxes. Preliminary indications are that property valuations on O'ahu will be down more than 10 percent, Garcia said.

Meanwhile, the Legislature is considering taking away the counties' share of hotel tax revenues, he noted. The city's share of transient accommodations tax added $43 million in revenues for the current year's budget.

Besides the cost of picking up responsibilities that now fall under the state, Garcia said he also worries about the possibility that the counties could be opening themselves up to more liability by taking on the duties.

The bleak financial situation has caused Garcia to shift his position on Hannemann's plan to create a new owner-occupant property tax classification. Garcia had been among those raising the biggest concerns, but said yesterday he now supports it because it would provide the city with another tool to help those homeowners he considers most in need of tax relief.

Opponents say an owner-occupant classification would make it too convenient for the city to shift the tax burden to those who are not owner-occupants, such as people who provide residential rentals and those who own commercial, industrial or agricultural properties.