Council Trims Budget ‘Fat’; More Cuts Ahead : Government: The city faces a $5-million shortfall. Officials say layoffs are not in the works.

Santa Monica’s estimated budget shortfall for the current fiscal year has risen to nearly $5 million, with a proposed bicycle path network leading a list of capital improvement projects excised, scaled back or postponed as the city scrambles to balance the budget.

At a City Council meeting on Tuesday night, City Manager John Jalili said the revised midyear budget has been balanced without cutting the level of service to the public. But he warned of tougher times ahead: the need for a 5% reduction across the board to cut $8 million from next year’s budget, or more if new programs are added.

“Every time we prepare to cut social services, we actually end up adding expenditures,” Jalili said.

Though Jalili increased the gloom level by mentioning the possibility of layoffs if the council balks at other belt-tightening measures next year, council members said layoffs are not in their plans. “I’m concerned about giving disturbing signals to the work force--unnecessarily,” Councilman Dennis Zane said.

According to an economic forecast from UCLA, Southern California is not expected to rebound from the recession until 1993.

City Finance Director Mike Dennis said the dip in revenues is the city’s first fiscal crisis in his nine years on the job. Sales taxes, utility taxes, parking fines, hotel bed taxes and development fee revenues have all fallen as the recession finally caught up with Santa Monica this year.

Altogether, the city’s income this year is now likely to fall $4.9 million below what had been expected when the $191.7-million budget was passed in early 1991. Part of the shortfall has been recouped through a selective hiring freeze and cutbacks in hiring outside consultants, which will save $1.3 million.

About $1.5 million has been returned to the city’s general fund by reducing the scope of or deferring capital projects. The largest portion of the capital savings comes from $500,000 earmarked for a comprehensive bicycle network that is in the early stages of development and will not need funding this year. Postponing the painting of City Hall frees up $60,000.

Various pier and beach funds are being drained of $700,000 because the projects are not at the stage where they need the money. The city’s reserve fund will contribute $600,000 to the shortfall, cutting it to a still-healthy $7.2 million.

Other smaller savings make up the balance.

Despite the cost-cutting measures, $500,000 from the capital improvement fund has been identified as a source of money for implementing programs recommended recently by the city’s homeless task force, and $300,000 is left in the budget for operating costs of those programs. A full cost analysis of the programs recommended by the citizen task force is due at the end of this month.

The hiring of 20 new police officers at a cost of $2 million, approved by the council last year, may prove more problematic. The city has temporarily suspended recruitment for the new officers.

The money to hire the additional officers was supposed to come from an increased real estate transfer tax paid when property changes owners. That money, however, is being held in reserve pending the outcome of a Los Angeles lawsuit that could affect the legality of the tax.

Meanwhile, Councilman Herb Katz suggested further cuts to find the money to hire the officers immediately. Jalili warned the council that it will be difficult to add $2 million to a budget for next year that must already be trimmed by $8 million. He said the matter is not urgent because the police force has grown 40% over the past decade and already operates at a higher staffing level than neighboring cities.

The council voted unanimously to approve the midyear budget changes, but also asked the city manager to prepare a study session to explore a backup plan to pay for the 20 new police officers.