Boise is facing a $3.4 million shortfall in 2009, and city officials are exploring ways, including possible layoffs, to make up the difference.

The shortfall is equal to 2 percent of the city's $164 million general fund budget, the majority of which is used to pay for police, fire and parks services.

This is the second consecutive year the city has seen anticipated revenue come up short. In 2008, revenue came in $3.7 million under budget, the first time since 2002.

Next year's financial forecast is even grimmer for city officials as they start preparing the 2010-11 budget. Based on current projections, the city would be $9 million short in 2010.

"In the months ahead, you probably will hear of cuts that we're going to have to make," said Adam Park, city spokesman. "But we're going to make sure that those cuts are the ones that have the least possible impact on residents." City leaders expect to decide by the end of the month, he said. Department heads are preparing recommendations to give to Mayor Dave Bieter. In a letter to city employees this week, Bieter said layoffs are "a possibility."

The city has been holding off filling several open positions and postponing major equipment purchases since last year, which helped the city end 2008 with a $2.7 million surplus despite a drop in revenue.

The majority of the surplus was placed in reserve for capital projects and cash flow. The city could draw from those accounts but wants to weigh all its options first.

"We don't want to dip into those funds before we absolutely have to," Park said. "We're trying to be very cautious about that because that's one-time money. Once we spend that money, it's gone forever."

Though Boise ended 2008 in the black, the cushion was significantly thinner than in past years. In the peak growth years of 2006 and 2007, the city had surpluses of $9.5 million and $12 million, respectively.

With the exception of property tax, there were shortfalls in all areas in 2008. The largest were in money from construction permits ($1 million), sales taxes ($1 million) and interest income (about $600,000).

Those trends look to continue through 2010 and possibly 2011, according to projections.

"We're going to feel the pinch. It's very real to the city," said Jade Riley, Bieter's adviser. "Are there going to be tough choices? Absolutely."

Chad Dryden: 672-6734