The state’s decision to unilaterally impose a contract proposal with wage reductions for teachers is unprecedented in the islands and could prove a test case for future public employee union negotiations, local labor experts said.

Gov. Neil Abercrombie, meanwhile, defended the Department of Education’s move Friday to implement its "last, best and final" proposal to teachers. The governor said Tuesday that his administration was driven by an "extraordinary deficit that we have to meet."

Hawaii State Teachers Association officials said Tuesday they were still exploring options on how to respond, and reiterated their interest in returning to the negotiating table.

The "last, best" contract for Hawaii’s 12,700 public school teachers includes pay cuts and furloughs equal to a 5 percent wage reduction in each of the next two years.

Teachers would also pay 50 percent of their health insurance premiums, up from 40 percent now.

HSTA’s board has already rejected the offer, and officials said the union would not take the proposal to its membership for a vote.

The existing two-year contract for teachers expires Thursday.

Current and former public employee union leaders and others said in interviews Tuesday that HSTA could try to block the department from implementing the contract through the courts or the Hawaii Labor Relations Board, but it is unclear whether the union would prevail.

Federal labor law allows a private employer to implement its "last, best" offer if the employer believes contract talks are at an impasse.

But applying that to public-sector negotiations in Hawaii, governed by state labor laws, is uncharted territory.

"Neither the state nor the counties have ever imposed their last, best offer unilaterally, (though) they’ve threatened it," said Joan Husted, who retired as executive director and chief negotiator for HSTA in 2007.

Husted said if the Department of Education is given the go-ahead to impose its "last, best" offer, it could dramatically change public employee contract bargaining in Hawaii.

Last year, in negotiations with professors, the University of Hawaii tried to implement its "last, best" offer, which included pay cuts, but that effort crumbled in the courts.

J.N. Musto, executive director of the UH Professional Assembly, agreed that if the Education Department is able to implement its "last, best" offer, public-sector negotiations would be affected.

Musto said besides seeking legal remedies, HSTA members could vote to strike.

Timothy Ho, president and chief executive officer of the Hawaii Employers Council, which represents mostly the private businesses in negotiations, said when companies reach an impasse with unions, they sometimes unilaterally impose a contract. But even in the private sector that’s uncommon, he said.

"It’s in everybody’s best interests to try to reach a deal," Ho said.

Abercrombie said the state’s action was necessary to achieve 5 percent labor savings and put changes in place before the new school year starts in August.

"I think that anybody would come to the conclusion that it (the contract) was not only fair, but that it was the best combination that we could put together in these tough times," the governor told reporters at the state Capitol.

Staff writer Derrick DePledge contributed to this report.