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I disconnected the z encoder from the main wiring harness to make sure other wiring wasn't affecting the tests. I jumpered +5VDC and GND across to power the encoder. I tested from GND to the four pins at the encoder connector as I turned the screw slowly:
A+: 1.77V, .08V
A-: .07V
B+: 1.77V, .08V
B-: .09V

I also tested from A+ to A- (1.7V,.012V) and B+ to B- (1.69V, .006V)

Do I need a new encoder?

If this is with the bare encoders (not connected to anything else)
I would say they are either bad or you have the pinout wrong

or they are really just single ended encoders? you could use them that way if you can't fix the problem..

I thought of that but 1.77V is not a valid high TTL level

Though 1.77V from a single ended encoder trying to
drive the 7I48s 120 Ohm differential termination is a possibility

So if the encoders output a valid TTL high (>2.4V) if _not_
connected to the 7I48. I would try jumpering the 7I48 for TTL inputs...

Also just to make sure, I am assuming you have A+ --> 7I48.ENCA A- -->7I48./ENCA etc

Thanks for the diagnostic help. There are x,y,z connectors near the controller that bring the encoder wires into the control cabinet. By swapping the y plug onto the z and x connectors I could get the x and z dros to move using the y handwheel. This confirms to me that my wiring from the connectors to the 7i48 is ok. I ordered one new encoder. If it works I'll order a second. I'm having trouble getting the Z encoder off the machine. The coupling uses set screws that take a .050" hex key.

While I'm waiting for the new encoder to come in I decided to power up the y axis drive to see if I could make some progress there. Up until this point I had the fuses out so now power could reach the drives.

I put the y fuse in and brought linuxcnc out of estop. It immediately went back into estop with a joint 1 following error. I went into the ini file and increased the following error to .1 from .0005. Brought the machine out of estop the table moves approx .1 and then I get the joint one following error. I switched the motor leads to reverse the direction of rotation. Brought the machine out of estop and the table moves approx .1 in the other direction and then I get the joint 1 following error.

Any hints? I'm sure I need to do some reading but if someone could point me in the right direction I would appreciate it.

If these are velocity mode drives, you cannot simple swap the motor leads or you will a drive runaway independent of any external drive.

You can swap both motor and tachometer leads but I think its better to keep the original motor drive wiring and if the feedback is reversed use the OUTPUT_SCALE parameter (assuming this is that this is the hm2-servo sample config) reversing the sign of OUTPUT_SCALE should get you back to negative feedback

One other detail to check is that the PWM gens are in mode 2 (the 7I48 needs mode 2 = up/down mode PWM)