Chicago Mayor Richard Daley’s talks with city unions over concessions are ongoing this week in an attempt to fend off 1,500 planned layoffs absent an agreement to help address a growing deficit in the 2009 budget.

The city is seeking wage cuts but unions want a guarantee that officials won’t come back and later seek layoffs if they agree to concessions. The city warned on Friday that it would begin distributing layoff notices as required under its collective bargaining agreement. The layoffs would take effect July 15.

“We do not want to lay off any city employees,” Chicago chief financial officer Gene Saffold said at a news conference Friday. “Mayor Daley has instructed us to continue meeting with the unions to reach agreement on cost-savings measures that we’ve proposed. And so, these notices do not signal the end of our discussions.”

The city escalated the pressure on its unions as officials warned that the current budget shortfall had risen to $250 million and could hit $300 million by the end of the year. Various spending cuts and other initiatives have reduced the current deficit to about $113 million. If implemented, the layoffs would save $34 million in 2009 and $76 million in future years.

Officials continue to resist calls from the unions and some aldermen to dip into the city’s $900 million of permanent reserves or to further tap mid-term reserves established with proceeds of the recent parking-meter system lease.

Chicago put $400 million in a permanent reserve to generate earnings to replace the annual parking meter revenues that will now go to private operators. The city tapped $150 million from the $1.1 billion deal for the budget. Another $125 million is intended to help balance future budgets and $320 million is in a rainy-day fund to preserve city services if needed.

“I understand that critics will argue that we should use more reserve funds this year instead of appealing to the unions, but I can tell you unequivocally that given the nation’s continually worsening economy that would not be a responsible decision,” Saffold said. “And better management alone will not balance this year’s budget under the current economic circumstances.”

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