The state House Finance Committee completed its draft of the budget yesterday, which would shrink Gov. Neil Abercrombie’s recommendations but still increase spending over this fiscal year.

The committee approved more than $10.9 billion for fiscal year 2012, a 7.1 percent increase from this year, and $10.9 billion for fiscal year 2013.

The increases reflect the cost of ending furloughs for state workers as scheduled at the close of the fiscal year in June, which adds more than $200 million a year to the budget. Abercrombie has said he would seek 5 percent labor savings in contract talks with public-sector labor unions to save about $88 million a year. But House lawmakers do not want to accept a specific dollar figure while negotiations with the unions are in progress.

"That’s a big cost element in the financial plan and in the budget appropriations that’s in the governor and the unions’ hands right now," said state Rep. Marcus Oshiro (D, Wahiawa), chairman of the House Finance Committee. Oshiro said he hopes contract talks are complete before the Legislature adjourns in early May.

Other factors that drive spending higher in the House draft include expanded Medicaid enrollment, state worker health and retirement costs and the loss of federal stimulus money that had been used to patch the budget during the recession.

The committee rejected Abercrombie’s requests for programs and initiatives he believes have been neglected, along with funds the governor believes are necessary to meet state obligations.

The committee, for example, declined to pay higher Medicaid costs for migrants from Micronesia, the Marshall Islands and Palau that Abercrombie maintains are required by a federal court ruling. The committee also refused to finance higher welfare costs to make up for anticipated federal money that never arrived.

The committee chose not to include an extension of the state’s agreement with unions to pay 60 percent of public employees’ health care premiums — up from 50 percent — beyond the last quarter of this fiscal year. The administration has said the cost-sharing split will be subject to contract negotiations.

"We don’t have that money at this point in time," Oshiro said.

The general fund portion of the budget, over which lawmakers and the governor have the most control, is $5.4 billion in fiscal year 2012, 10.2 percent higher than this fiscal year, and $5.6 billion in fiscal 2013.

But the committee’s draft is less than what Abercrombie recommended, with substantial reductions of his requests for the Department of Education, $55 million; Department of Human Services, $22.6 million; Department of Health, $17.8 mil- lion; and the University of Hawaii, $16 million.

Lawmakers and the administration are also discussing welfare and Medicaid benefit cuts to reduce costs.

Spending reductions — and any labor savings reached through collective bargaining — would be combined with separate revenue-generating bills to close a projected two-year budget deficit of $700 million. The House on Tuesday moved nearly two dozen bills that would raise more than $600 million over two years to lessen the deficit.

The state Council on Revenues will meet today to update the state’s revenue forecast, which could lead to a new deficit estimate. The council has projected 3 percent revenue growth this fiscal year, but revenues are down 2.1 percent through the first seven months, mostly due to the effect of Gov. Linda Lingle’s delay of income tax refunds last year.

If the council adjusts its forecast for this fiscal year or the next two years, the change would ripple through the budget lawmakers are now preparing.

House Minority Leader Gene Ward (R, Kalama Valley-Hawaii Kai) urged the committee to wait until the council releases the new forecast before passing the budget draft. Otherwise, he said, the draft could be out of balance as early as this afternoon should the forecast change.

But Oshiro wanted to move the draft yesterday to ensure the House meets a procedural deadline next week to vote on the budget and send it to the Senate. The Senate Ways and Means Committee, which will prepare a Senate draft, can take the council’s new forecast into account.

House and Senate lawmakers will meet in conference committee next month on the final draft that will go to Abercrombie for his consideration.