The city of Santa Barbara is facing a bleak financial future, with projections for the current fiscal year downright gloomy — and estimates for next year even worse.

In a grim forecast, city Finance Director Bob Peirson on Tuesday told the City Council that he is projecting a deficit of about $5.4 million for the ongoing fiscal year, or about 5 percent of the general-fund budget. For the 2009-10 fiscal year, which begins in July, he expects a gap of $8.3 million.

Although the shortfall for this fiscal year — which is about half over — most likely will not result in layoffs, next year could be another story, he said.

“The state, national and world economy is undergoing a distress, which many believe has not been seen in this era since the Great Depression,” he told the council, adding that many municipal governments are now reeling as a result. “I’m afraid we’re no different.”

While Peirson isn’t expecting layoffs for the budget year, there will be cuts to the tune of $3 million. For the most part, departments will be asked to make cuts that are commensurate with their share of the total budget. In other words, the cuts are across the board, with the exception of police and fire, which will take proportionally less of a hit.

All of the retrenchments, he said, should be possible without having to make layoffs, largely because there are already many unfilled positions in every department.

“We believe we can maintain these targets without any meaningful impacts on services,” he said. Next year, however, the public probably will begin to feel the pinch.

In a reflection of the nation’s retail slump, the biggest culprit for the local malaise is sales taxes. However, in a counter-intuitive twist, the quarter ending in June posted markedly worse sales-tax revenues than the quarter ending in September, with the former being down 7.4 percent from the same quarter the year before, and the latter being down just 0.6 percent. In any event, the overall slowdown has led the budget office to project a shortfall of $1.25 million. 

The city also has taken a major hit with building permit and planning fees, which are projected to bring in $1 million less than last year. 

“It’s no surprise, given the state of the real-estate crisis and credit mess,” Peirson said. “Essentially, construction has ground to a halt.”

Interestingly, another major shortfall stems from how more people appear to be wising up to the city’s parking laws: Revenue from parking tickets is projected to be down $350,000.

Peirson said he believes that this has something to do with how the city recently raised the fee. “I think people are starting to pay more attention,” he said.

Also causing a strain this year is the unusually high number of longtime employees who are retiring. Peirson said each of the employees can cash out their unused vacation time and sick pay, costing the city $400,000.

The remaining $2.4 million of this year’s $5.4 million shortfall is explained by a rather abstract concept.

Peirson said that in years past, nearly all city departments were almost always able to end the year with a surplus, usually to the tune of about $2.4 million. This end-of-the-year result became so common that the city eventually started factoring it into its projected budgets. Given this year’s extraordinary circumstance, Peirson has removed this assumption from the budget.

In the 2009-10 fiscal year, Peirson is essentially expecting a continuance of these trends. In that budget, he said that the city has not yet begun to decipher where the cuts should come from.

But in the 2008-09 budget, every department has been assigned a target amount for cuts. Peirson’s department, for instance, needs to come up with a savings of $191,000.

Peirson said about half of that amount would have been saved anyway, because departments typically come in under budget. The other half, he said, will come from unfilled positions.

“I’ve got a senior-level staff position that’s been vacant all year,” he said. “We’re going to leave that vacant. I had another that was open for about four months while we were doing a recruitment. That’s four months of savings.”

He said the other departments should be able to tighten their belts in similar ways.

Despite how police and fire have been insulated from taking a proportional hit, their targets for cuts are still high, because their overall share of the budget is high.

The police department works with a budget of $32.5 million, about a third of general-fund budget. As a result, it is being asked to shave the most: about $659,500.

Peirson said that under normal circumstances, the police department probably would finish the year $300,000 under budget, and so the real cut is more like $359,000.

This, he said, should be able to happen without layoffs.

“It sounds like a big number,” he said, “but it’s not even 1 percent of the department’s budget.”

Write to rkuznia@noozhawk.com.