"If there's a new economic reality, everybody has to adjust to it," said Malloy.
Democratic leaders have offered their ideas for covering this fiscal year's deficit ahead of a vote on a bipartisan plan in the works to fix it.
Democratic and Republican legislative leaders met privately on Wednesday with the Governor.
The Democrats, who control the General Assembly, are calling for sweeping money from various accounts, including $1.9 million set aside for seat belts on school buses.
Both sides have suggested preserving some funding for hospitals and community-based social service programs.
Malloy and other legislative leaders called on state employee unions to come back to the bargaining table to renegotiate contract terms in an effort to curb health care, pension, and other retirement related costs. Malloy conceded the state labor unions don't have to come back to the table for any negotiations until 2022.
Lawmakers say they expect to vote Tuesday on a bipartisan plan to slash the current deficit, which is approximately $220 million. They don't have a final agreement on the details.
Legislative staff members are expected to meet over the weekend to discuss the plan.
On Wednesday Malloy said state employees who are thinking about retiring from state service should do it now because they won't be offered any incentive programs and that an early retirement inducement is ``off the table'' as a way to help fix the state's budget deficit problems.
Malloy is telling employees, ``If you're going to retire, you should retire.'' He added that retiring might actually save someone else's job.
The governor's administration is preparing to lay off a substantial number of state employees to help address a projected $900 million deficit in the fiscal year that begins July 1.
Malloy says pension and benefit concessions, which the unions oppose, and changes in wage packages currently being negotiated could mitigate the number of job cuts.