The state wants to keep the growth in employee compensation — including wages, benefits and pension contributions — below 6 percent. The state said required pension contributions eat up nearly 4 percent of that.

"We're about a percent and a half apart between their proposal and ours," said Ken Allen, president in Oregon of the American Federation of State, County and Municipal Employees, which represents about 6,000 state workers.

Allen said negotiations over working conditions and other issues that don't affect the bottom line have been settled.

AFSCME and the Service Employees International Union have their next scheduled meetings with state managers on Monday. A continued stalemate could eventually lead to a strike, but only after a 30-day cooling off period and a union strike vote.

Department of Administrative Services Director Michael Jordan sent a memo to state agency directors last month requesting that they submit contingency plans for providing essential state services in the event of a strike. But both sides downplayed the likelihood of a work stoppage.

"You never know for sure, but at this point both the state and the union are continuing to negotiate and mediate, and both parties are continuing to work toward a settlement," said Heather Conroy, executive director in Oregon for the SEIU, which represents 23,000 workers paid by the state.

Health care costs are rising rapidly, and Kitzhaber has said that he thinks state workers should contribute to their health care costs as most workers in the private sector do. The state's proposal would require workers to pay 5 percent of their premiums, which would be subsidized in the first year for workers making less than $30,000.

The unions argue that they've already agreed to save the state millions on health care through other benefit shifts, like higher copays and deductibles. AFSCME said this week it was willing to consider covering a small portion of health premiums if the state would agree to leave money on the table for a wage boost.

The state's latest offer does not include cost-of-living raises but would allow some employees to get a "step" for added experience.

Nationally, state workers pay on average about $227 per month toward the lowest-cost family coverage available to them, and states chip in an average of $1,289, according to data from the National Council of State Legislatures. At least eight states pay the entire health care premium for their workers: Delaware, Iowa, North Dakota, Oklahoma, Oregon, Pennsylvania, Utah and Virginia.

State costs for employee health care range wildly, from $356 per family in Mississippi to $1,973 in New Hampshire, according to the NCSL data.

Oregon spends on average $1,263 per month per worker for health care premiums.

Other states have wrestled with similar issues as public employee compensation has become a hot-button political issue. Health care was a key point of contention in Wisconsin's union fight this year, and premiums were hiked to about 12 percent of the average employee's salary. New Jersey Gov. Chris Christie last month signed legislation significantly boosting employees' health contributions based on income.

And Michigan's Republican-controlled Legislature is working on legislation that would either cap how much the state would pay for each worker's health care premium or require all public employees to pay at least 20 percent of their premiums. Most state workers there currently pay 10 percent.

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Associated Press writers Kathy Barks Hoffman in Lansing, Mich., Beth DeFalco in Trenton, N.J., and Scott Bauer in Madison, Wis.