In that case, however, municipalities would have to return 20 percent of savings to employees in the first year, instead of the 10 percent in the original plan.

Union officials vowed to continue to fight the plan, which was included in the House version of the state budget. The Senate has yet to release its budget plan.

"You don't take collective bargaining away from unions here in Massachusetts," said Massachusetts AFL-CIO President Robert Haynes. "We're going to fight this to the bitter end."

Municipal leaders said they were pleased with the proposal. They said soaring health care costs are threatening core services.

"This is about saving jobs," said Massachusetts Municipal Association President Geoffrey Beckwith. "It's about providing services — public safety and education services — and making sure taxpayer dollars are being spent in a way that is sustainable and appropriate."

Union supporters were caught off guard by the decision of House leaders to push through the amendment on the second day of debate.

"In any negotiation you give and take, and it seems like in this one a lot has been given and the opportunity for us to negotiate a good deal has been taken away from us," said Rep. Martin Walsh, D-Boston.

The deal emerged during debate on the House's proposed $30.4 billion spending plan for the fiscal year that begins July 1.

Earlier in the day, lawmakers voted to bar welfare recipients from using their state-issued electronic benefits cards to buy alcohol, tobacco or lottery tickets.

Supporters of the ban say it not only safeguards public resources, but guarantees recipients are using public dollars for essential needs.

"It will prevent further scamming of the system and abuse of taxpayer dollars," said Rep. Shaunna O'Connell, R-Taunton.

The ban also extends to store owners who would be prohibited from accepting the cards as payment for the banned products or face fines up to $1,000.

The House plan would also create tough sanctions against anyone who steals or embezzles welfare funds, with violators facing fines of up to $25,000 or five years in jail.

The ban passed unanimously.

House lawmakers also voted 128-22 to repeal a law requiring medical companies to disclose to state regulators any gifts given to doctors while banning other kinds of gifts outright.

The 2008 law bars pharmaceutical companies and medical device manufacturers from giving doctors tickets to sporting events and the theater, as well as vacation trips.

The law also requires the firms report to the state Department of Public Health all gifts over $50 offered to doctors, hospitals, nursing homes, pharmacists and other health providers.

Critics say the law harms the state's competitive edge while backers say it helps prevent pharmaceutical groups from encouraging doctors to prescribe pricier brand-name drugs instead of lower-cost generics. Violators face $5,000 fines.

"There is ample evidence that the biotech industry is not shying away from Massachusetts" despite the ban, said Rep. Jason Lewis, D-Winchester, who said the state added 800 biotech jobs last year.

The repeal faces a tougher fight in the Senate.

One of the law's top backers is Senate President Therese Murray, D-Plymouth, who has said a goal of the ban is to reduce waste and inefficiencies that could threaten the state's landmark 2006 health care law.

While more than 700 amendments have been proposed, much of the House budget debate is conducted away from the public eye.

Throughout the debate, House leaders tell lawmakers they can adjourn to a separate room to discuss which amendments in a given category should be approved and which should be defeated. Those meetings are closed.

Amendments deemed worthy of passing are gathered into a single, so-called "consolidated amendment," which is then typically approved on with a single vote.

On Monday House lawmakers defeated a Republican-backed amendment to cut the state's 5.3 percent income tax to 5 percent over a three-year period beginning July 1, 2012.

A proposal to reduce the 6.25 percent sales tax was also defeated Monday.

Democratic House leaders say their budget trims spending and dips deeper into the state's reserve fund. The plan, which includes no new taxes, is designed to bridge what's been estimated as a nearly $2 billion gap between revenues and spending levels in the fiscal year that begins July 1.

The Senate will take up the budget after the House completes its action.

Any differences between the two branches will be worked out by a House-Senate conference committee before the spending plan is sent to the governor for his signature.