They’ve already slashed staff, raised taxes and partly privatized the museum. Now, Pacific Grove city officials are digging even deeper to balance the 2009-10 budget.

“When you have less employees, you have less services,” Mayor Dan Cort says. “Folks are going to feel the lessened hours at the library. Repairs and Public Works activities won’t be as quick. There’ll be a lot of delays.”

As revenues dwindled by almost $2 million in the past two fiscal years, the finance and city manager departments have each lost roughly 40 percent of their budgets. Other big general fund cuts hit the library, whose slice shrank from $830,000 in 2007-08 to $470,000 in 2009-10; and the recreation department, which slid from $800,000 to $350,000.

Other departments have seen steady general fund gains over the past two fiscal years: City Council (from $290,000 to $340,000), city attorney ($340,000 to $420,000), fire ($2.8 million to $3.4 million) and police ($4.8 million to $5.3 million).

The city isn’t out of the red yet. Officials estimate a $1.5 million revenue shortfall – 9 percent of the general fund – in the current year, not factoring in the likelihood that the state borrows another half million dollars.

“Unless the economy recovers during FY 2009-10,” Interim City Manager Charlene Wiseman writes in the budget summary, “mid-year cost reductions, additional new revenue sources, and alternative ways of delivering services may be required.”

Some voters who approved a 1-percent sales tax hike last June hoped it would help bail out the museum and library. But despite the measure’s estimated $1.1 million annual general fund boost, neither institutions have seen more public funding: The council approved the transfer of museum operations to a private foundation, and the library was kept afloat (with reduced hours) by a private donation.

Finance Director Jim Becklenberg reports the city is still looking for long-term library funding solutions. Options include reducing services to 20 hours per week, consolidating with Monterey’s library and closing until the city has better financial footing.

Other cost reduction strategies include de-funding vacant positions, implementing furloughs and pay cuts, and further reducing city services.

Roughly $400,000 in new revenue could come from charging permit fees and a “hotel tax” on vacation rentals and modifying the golf fee structure. Becklenberg also recommends heightened parking enforcement, higher costs for city recreation and planning services, and increased library fees.

Other revenue-generating measures, such as installing parking meters along Oceanview Boulevard and at Lovers Point, were considered but not recommended.

Cort says the city-owned Bathhouse, golf clubhouse and golf links should be tapped to make more money. The city should encourage the Safeway on Forest Avenue to expand and add green features, he says, and look for more opportunities to use philanthropy for public services.

“The private-public partnership with the museum is such a godsend,” he says. “If we could do something like that with our library, wouldn’t that be great?”

The council approved the 2009-10 budget June 3. Staff will provide a budget update to the Council in the fall, when more cuts and fees may be needed.