Facing a lingering $1.8 million deficit, the Berkeley City Council revised its plan to implement services - and cuts - for the next four months and introduced cost-saving strategies for its upcoming biennial budget Tuesday, highlighting increased fiscal frugality in an uncertain economy.

The decline in the city's revenue stream - from an estimated $146 to $144.25 million for fiscal year 2011 - is attributed to a decline in property and sales taxes as well as parking fines, most of which are sensitive to the economic climate, according to city Budget Manager Theresa Berkeley-Simmons. Property tax revenue, for example, dropped by about $500,000 in fiscal year 2010.

Though the city has already instituted one-time money-saving measures - including voluntary furloughs that saved the city $1.7 million in fiscal year 2011 - the council will have to implement further cutbacks to close the mid-year and projected budget deficits.

In the past two years, 130 city employee positions have been eliminated, and seven more are slated for termination, with 14 employees facing pay cuts or job transfers in the coming months, said City Manager Phil Kamlarz.

The city is also reducing expenditures by deferring about $813,000 in capital improvement projects for fiscal year 2011, according to Berkeley-Simmons. Deferred projects include a bike and pedestrian program and storm response and maintenance projects.

"We thought we were going to get through this," Deputy City Manager Christine Daniel said at a budget briefing Tuesday. "At mid-year, we realized we have a worse problem than we expected."

The city's budget woes, though, extend beyond June 30, when fiscal year 2011 will conclude.

A general fund deficit of $3 million in fiscal year 2012 and an additional $4 million in fiscal year 2013 - stemming largely from increased costs to employee benefits - are expected to plague the upcoming budget.

Over the next two years, the city's contribution to its employee pension plan is expected to increase by $7 million, while expensive health care premiums will cost the city another $16.3 million, according to Kamlarz.

A long-term plan to address the city's costly contributions to employee pensions has yet to be finalized, and a $253 million debt due to a decline in assets looms over the budget for now.

The city's department of health services will shoulder a projected $3 million deficit in fiscal year 2012, resulting in direct cuts to services.

The city is also expected to lose $1 million in federal funding to be administered by the city to community service agencies. Affected funds will include the Community Development Block Grant, which provides for affordable housing and poverty outreach programs in the city.

Still, state funding remains uncertain until the state budget is finalized in June. Gov. Jerry Brown's proposed budget especially threatens the redevelopment sector, including the city's Fourth Street project.

The council will continue discussion on the biennial budget on March 8.

Tags: MAX ANDERSON, BERKELEY CITY COUNCIL, KRISS WORTHINGTON, PHIL KAMLARZ, JERRY BROWN