City Manager Accepts Job in Newport Beach : * Politics: Before leaving, Kevin J. Murphy plans to cut another $1.5 million from the city’s budget.

Alhambra City Manager Kevin J. Murphy, who had been criticized for getting a raise shortly before laying off city workers, is resigning next month to become city manager of Newport Beach.

But before he goes, Murphy said, he will slash another $1.5 million from Alhambra’s 1992-93 budget.

On Tuesday, Murphy said he will ask the Alhambra City Council to make cuts in services and personnel before March 23, the date he is scheduled to start his new job. The City Council last month demoted and laid off some workers and eliminated other programs for a savings of $857,677.

Even more drastic measures are necessary, Murphy said, because plummeting sales tax revenue and shrinking state monies will leave the city about $1.1 million in the red during the next fiscal year unless more cuts are made. Murphy, 38, was offered the Newport Beach post Monday and turned in his resignation that night. He was chosen over two other finalists--a San Diego County planning director and an unnamed candidate--from dozens of applicants from throughout the country. He will replace Robert L. Wynn, who is retiring.

The Newport Beach City Council set Murphy’s annual salary at $130,000 and, in addition, pledged to contribute $200,000 toward the cost of a home, Murphy said. Newport Beach requires its manager to live in the city. Home prices in the Orange County coastal community average $550,000, a local real estate agent said.

Newport Beach, population 66,000, has 760 full-time employees. Alhambra, population 82,000, has 420 full-time city workers.

Murphy makes $100,000 in Alhambra. He has been city manager since 1983, and prior to that, was director of housing and community development and an administrative assistant in Alhambra.

The Alhambra council will meet Monday to begin the process of replacing Murphy.

Widely credited for pushing through key projects and establishing a close rapport with City Council members, Murphy nonetheless has come under criticism from city workers and others for requesting a 15% raise late last year. His request, and the council’s consent, came four months before the latest round of budget cuts.

Also during his tenure, in 1989, the U.S. Justice Department sued Alhambra, alleging racial discrimination in the city’s fire and police departments. Officials vehemently denied the charges, but last year agreed to settle with the federal government.

Among other measures, the settlement set aside $180,000 for damage claims for those whom the Justice Department decides were discriminated against.

Since then, Murphy said, he has stepped up efforts to recruit minorities, although he said he had always done so. Last year, he hired a black fire chief, Raymond Brooks, to replace Robert Tolladay, who died in a 1990 plane crash.

Most recently, Murphy lobbied state and federal officials in support of a controversial proposal to extend the Long Beach Freeway (710). State officials have given preliminary approval to the project, but South Pasadena officials and others are fighting it.

He also heads a coalition of cities being sued by companies paying for the cleanup of a toxic landfill in Monterey Park. Murphy helped form the coalition to coordinate a defense against the suit, which claims the cities also are liable for the dumping of hazardous waste at the site.

Times Correspondent Lisa Mascaro contributed to this report.