The May revised budget includes more than $800,000 in expenditure reductions from last year and revenue enhancements of about $700,000 to deal with a projected shortfall of between $1.5 and $3.2 million.

The fiscal year 2004­05 budget basically follows the budget reduction proposals made in January, though a few state budget figures have changed since that time. Originally, California's budget included a $400,000 "takeaway" from the town's property tax revenue for the Educational Revenue Augmentation Fund, and a takeaway of the same amount from the redevelopment agency.

In the governor's May revision, that amount changed to $500,000 from the town and $303,000 from redevelopment agency.

The town's proposed budget calls for the elimination of 15.6 full-time equivalent positions. Though there will be only two actual layoffs (of parking enforcement officers), funding has been pulled for 5 ¹/2 currently vacant positions, as well as the equivalent of 2 ¹/2 currently filled part-time positions. The remainder, equivalent to almost six full-time positions, will be reduced by cutting hours from personnel schedules.

Other cost-cutting and revenue-enhancing measures include increases in fees for various town services, longer police response times to non-emergency calls and reductions in library hours and acquisitions.

Finance Director Steve Conway said that, despite the cuts, Los Gatos is still in reasonably good shape. And there is the possibility that the current fiscal year's budget will not be fully expended, and rolled into year-end reserves. Conway said those could be added into next year's budget if necessary.

"We've been cutting back and making do," he said. "We're trending behind in our spending. We think we've been doing that without impacting community too much."

Town Manager Debra Figone said Los Gatos is well prepared for a range of financial situations. The "Tier 1" budget discussed at the May 17 meeting assumes that the state budget will pass basically in its current form, and that town revenue will grow at a flat rate. But should the state budget call for more takeaways, or the town's revenues decrease, a second-tier plan has been prepared.

"The budget is designed to address the best case and worst case scenarios," Figone said. She added that the town's financial situation "really could be a lot worse. Why it is not worse is we have been taking proactive measures."

Indeed, the proposed 2004­05 expenditure reductions add to $3 million worth of reductions over the last three fiscal years, and about 19 full-time equivalent position reductions during the current fiscal year.

The council praised town staff for its work in creating the budget and requested that a few areas be re-examined.

Though the Los Gatos Public Library is facing a reduction in hours from 60 to 52, and a reduction in materials acquisitions from $200,000 to $130,000, council members asked staff to consider providing restoration of at least four of those hours and about $35,000 of the acquisitions budget.

Councilwoman Sandy Decker also urged community members to step forward with both monetary and materials donations.

Shortly afterward, Marc Jensen, a transportation and parking commissioner, delivered two new books and a $200 donation to Decker.

"We were watching KCAT and heard the call," a note attached to the donation read.

But, recognizing that an outpouring of similar gifts is unlikely, the council still directed staff to see if further cuts could be made in other areas of the library budget to allow for restored hours and materials.

The council also asked staff to examine and consider restoring a $3,130 cut to A Place for Teens and a $6,000 cut to the Los Gatos Museum Association. Though they again asked that the funds come from the departmental budget, several council members said they would not have a problem taking that relatively small amount of money from one of the town's reserve funds.

"I would like to see the teen center really thrive," Councilman Joe Pirzynski said. "That's one area that I would like to see restored."

Figone said staff would look at the requested changes and report back to the council.