More than 350 Pearl Harbor shipyard workers could be laid off as the Navy faces a funding shortfall due to a budget stalemate, officials said.

The latest potential job cuts follow news that 125 contracted vehicle mechanics, welders, painters and managers at Schofield Barracks were furloughed for 30 days starting this week, with big defense cuts looming.

The job actions are viewed as the tip of the iceberg in Hawaii if Congress doesn’t act by March 1 to avert the sweeping, across-the-board cuts known as sequestration.

The steps are being taken at Schofield and potentially at the shipyard by contractor BAE Systems, the British defense, security and aerospace giant.

BAE Systems Ship Repair President Bill Clifford said in a letter Tuesday to BAE’s nationwide "ship repair team" that more than 3,500 production, management and administrative staff in Hawaii; San Diego; Norfolk, Va.; and Mayport, Fla., are receiving warning notices that they may be laid off.

BAE said it is taking the steps because the Navy announced it is preparing to cancel all surface ship maintenance scheduled at private shipyards from April to September — including $35 million in repairs on the destroyer USS Chafee at Pearl Harbor.

John Measell, a spokes­man for BAE Systems Ship Repair in Norfolk, said the layoff warning applies to 253 BAE employees in Hawaii.

BAE Systems Hawaii Shipyards performs surface ship jobs for the Navy at Pearl Harbor Naval Shipyard dry dock 4 using an on-island workforce of about 750.

In addition to the 253 BAE employees, more than 100 other surface ship workers with subcon- tracting firms could be vulnerable to the loss of Navy ship work, said Iain Wood, president of the Ship Repair Association of Hawaii.

"Obviously those folks work here, live here, eat here, spend their money here, pay their taxes here, so that will have an impact on the economy," said Wood, who also is chief operations officer with Pacific Shipyards International, which does contract work for the Navy.

Submarines represent 90 percent of the overall shipyard work. The shipyard is the largest industrial employer in the state with a combined civilian and military workforce of about 5,000.

Clifford cautioned in his letter to employees that the Navy issued an "intent to cancel" the ship work, and the notice to workers states that they "might" be laid off if the reduced workload materializes.

"We do not take these actions lightly, and we regret the anxiety it causes our employees and their families," Clifford said, adding that BAE is working with the Navy and members of Congress to try to mitigate the impact of the proposed work reductions.

Without an appropriations bill, the military services have been funded under a continuing resolution. The Navy said it has been funded based on last year’s spending levels, underfunding this year’s operations and maintenance accounts by $3.2 billion.

An additional $1.4 billion in unplanned expenses was accrued as a result of increased naval operations in the Middle East, higher fuel costs and unexpected repairs on five ships, the Navy said.

With both the continuing resolution shortfall and the threat of sequestration, the Navy and other services have started to take steps to trim costs.

Sequestration would require $500 billion in defense cuts and an equal amount in nondefense cuts over 10 years.

U.S. Sen. Mazie Hirono, D-Hawaii, recently warned that 18,000 defense workers in Hawaii would be subject to furlough days with sequestration. Other federal workers also would be furloughed.

Sequestration also would cut into defense contracts that average $2.3 billion a year in Hawaii, she said.

Defense News reported Thursday that the Pentagon is slowing payments to contractors to keep cash on hand prior to sequestration taking effect March 1.

BAE Systems furloughed about 125 workers at Schofield for 30 days starting this week, officials said. Among them were heavy-equipment mechanics making nearly $30 an hour. It is not certain they will get their jobs back.

Army officials in Hawaii initially said the cuts were not related to current budget shortfalls and the threat of sequestration.

Subsequently, the Army reversed itself.

"In fact, the contracted employees’ jobs were terminated as a direct response to a Department of Defense directive in preparation for possible sequestration," said G. Michael Warren, deputy public affairs director for U.S. Army Pacific at Fort Shafter. "All of the services were asked to propose reduced spending, some as high as 40 percent."