By JONATHAN J. COOPER

Of The Associated Press

SALEM - Negotiations with public employee unions are under way in Oregon, with much less noise than the fights in the Midwest that threaten collective bargaining power.

Still, the stakes are high for Oregon union members, as the state looks to save money wherever it can. All sides agree that government workers will see smaller paychecks when lawmakers wrap up negotiations on a budget for the next two years.

"That's the curse of a recession," said Rep. Dave Hunt, D-Gladstone, his party's leader in the state House. "Every Oregonian ends up getting hit by it."

Gov. John Kitzhaber's negotiating team fired its opening salvo this week in negotiations with the American Federation of State County and Municipal Employees.

The federation is the smaller of the two major unions representing Oregon workers. Formal negotiations have not yet begun with the larger Service Employees International Union.

Kitzhaber's proposals would result in smaller paychecks for union workers through decreased pay and increased health care and retirement costs.

The state is proposing that spending on employee health care be capped at the current level, with increased costs becoming workers' responsibilities. It also proposes that workers take a 3 percent pay cut through seven unpaid days off, and pick up a 6 percent contribution to their retirement plans that is now covered by the state.

"It's the worst proposal we've seen in 20 years, but it's just a starting point," said Ken Allen, federation executive director.

Public employee compensation is getting intense interest nationally amid protests in Wisconsin, where Republican Gov. Scott Walker has proposed not just deep pay and benefit cuts but also the elimination of workers' rights to bargain collectively for pay, benefits and working conditions. Governors in other states have made similar proposals.

It appears such a proposal wouldn't get much traction in Oregon.

"Gov. Kitzhaber is a strong believer in the right of workers to organize and bargain collectively," his chief of staff, Curtis Robinhold, wrote in a recent memo to state agency directors.

Kitzhaber's first offer will not be the last one. Negotiators for the state and unions will continue to meet periodically and are unlikely to reach an agreement before the next revenue forecast comes out in April.

It would be impossible to pass a balanced budget without cutting into employee compensation, especially with health care costs that are rapidly rising, said Rep. Dennis Richardson, R-Central Point.

The governor's offer to keep paying health costs at current levels is particularly generous, he said.

"If that's the governor's opening offer, the unions ought to take it," Richardson said.