Cities Hunt for New Ways to Save Money : Government: The state budget forces already strapped municipalities to look at layoffs and at reducing police, fire and other services.

After spending an uncertain summer agonizing over the state budget crisis, Orange County city leaders are grappling with some tough cost-cutting decisions as they try to balance already-depleted city budgets based on the latest bad news from Sacramento.

With the belated state budget taking away $1.3 billion from local governments statewide, many city officials say that while they are relieved that the cuts in municipal spending won’t need to be as deep as they originally feared, their financial situations remain bleak.

“We are beyond simple cuts at this point,” said Ken Stone, audit manager for Anaheim. “We are exploring all of our options. Our strategy is to try and minimize the impact on the public and on employees.”

While some cities have already officially revised their budgets to reflect a decrease in property taxes and redevelopment funds, most cities are still deciding where to make the cuts. City officials say that budgets are already stripped to the bone and that choices will be tough.

“We are going to have to either cut services or raise revenue, and at this point we have ruled out nothing,” Cypress Finance Director Richard Story said. “Things didn’t hit as hard as we initially thought they would, but it’s still more than we are going to be able to just absorb.”

Among the grim alternatives being considered by some financially strapped cities are layoffs, work furloughs, hiring freezes, pay cuts and reductions in city services, including cuts in police and fire departments.

One of the most dramatic actions could take place in Orange on Tuesday when the City Council is likely to impose a mandatory work furlough, a proposal that would cut the salaries of more than half of the city’s employees by 10% and shut down all government buildings on Fridays, except for the police and fire departments.

“My feeling is that it’s a temporary measure,” Councilwoman Joanne Coontz said of the proposed furlough. “The state really did us in, but we had problems to begin with. We need to clean our house and put it in order, but the state needs to do the same thing.”

The state’s budget action cuts away more than $1 million from Orange’s general fund and $1.6 million in Redevelopment Agency property taxes. The city had already made $4.4 million in cuts when it passed a $54.4-million budget in June, city officials said.

“We would be even worse off if we hadn’t made those earlier cuts,” Coontz said. “Obviously we can’t continue to do business as usual. I think there had been denial all around that we had a problem. I think we need to restructure and rethink the way we operate.”

The furlough, which city officials say is an alternative to laying off as many as 118 full-time employees and 32 part-time employees, would make up $1.3 million of the budget shortfall.

Officials in Newport Beach reacted swiftly to the state’s action, which they said forced them to cut an additional $4 million from the $90-million budget passed by the City Council in June.

Last week, the city laid off 12 temporary maintenance workers in the Parks, Beaches and Recreation Department. Four of the workers are expected to be hired back as permanent employees within the next week, City Manager Kevin J. Murphy said. The reduction in workers will mean that parks and beaches won’t be cleaned as often and trees won’t be trimmed as frequently, Murphy said.

In addition, the city reduced the hours of six library employees and will not be filling 15 vacant city positions, including five police jobs and the newly created position of public education firefighter. The hours the libraries are open will be reduced beginning next month, and plans to commission a $90,000 sculpture for McFadden Plaza have been dropped.

Mayor Phil Sansone said that although he anticipated “having the state steal our money,” the layoffs, hiring freeze and other cuts are jolting to Newport Beach.

“This is the first time something like this has happened in memory,” Sansone said. “I understand this is the worst financial situation the city has been in since the passage of Proposition 13. Obviously it has affected morale.”

San Clemente, which adopted a bare-bones budget in June, is looking at slashing an additional $800,000 from its $20-million general fund budget in the coming months, after losing about $630,000 in property tax revenue and $170,000 in redevelopment revenue.

The City Council had already cut about $2 million from the budget in June. The trim included the elimination of 17 positions.

Among the additional cost-cutting options that will be presented to the City Council is a controversial proposal to disband the city’s 60-year-old Police Department and contract with the Orange County Sheriff’s Department for police services.

Even if the proposal is rejected, the Police Department could face dramatic cuts, since it receives about 50% of the city’s general fund budget, city officials said.

Huntington Beach, which will lose more than $2 million in property tax revenue and more than $800,000 in redevelopment money, voted last week to extend a hiring freeze until next July in order to balance their budget shortfall.

The council also voted to spend about $565,000 from last year’s budget surplus and will reduce general fund spending by another $1.6 million, to $96.2 million, city officials said.

The Westminster City Council last week narrowly approved a $27.5-million budget that included a 5% cut in all city departments except for the Fire Department, which was cut by 3%.

The city’s Police Department faces a $125,000 reduction in overtime pay, and the service life of police, fire and other city vehicles will be extended beyond three years.

Brea, which like Huntington Beach has a major redevelopment plan, will lose $2.2 million in redevelopment funds and $270,000 in property taxes. But the city will fare better than many of its neighbors because of high sales tax revenue, which accounts for 35% of its budget.

Financial Director Larry Hurst said that despite the loss in property taxes and redevelopment money, the city is ready to make some “tough decisions” now that the long budget impasse in Sacramento is over.

“For a long time, we knew something was going to happen,” Hurst said. “It’s a relief to have it be over with because at least now we know what we’re dealing with and can get on with business.”

“But,” he added, “there’s really no excuse for the state doing what they have done to local governments. They shouldn’t be balancing their budget on our backs.”