SAN FRANCISCO — San Diego Mayor Jerry Sanders last week proposed an 18-month budget that would eliminate a projected $179 million deficit in California’s second-biggest city.

Sanders said the City Council should act now to address the entire budget deficit, rather than waiting for the usual budget cycle to begin in the spring. The plan would cover the remainder of fiscal 2009-10 and all of 2010-11.

“By taking decisive action now, the city will avoid cutting an additional $124 million in June of 2010,” Sanders said at a press conference. “Like virtually every city in America, San Diego has been hammered by plummeting revenues because of the national recession and by the poor performance of the stock market during the last fiscal year, which caused our pension costs to skyrocket.”

San Diego, which was wracked by a municipal bond disclosure scandal related to underfunding its pensions earlier in the decade, has taken especially aggressive action to cut its budget and, unlike most big cities, has so far refused to spend its rainy day fund to preserve services.

Sanders’ latest proposal would primarily balance the budget with spending cuts, while continuing to make full annually required pension contributions. The proposal does, however, rely on many one-time fixes.

About $83 million of the cuts are ongoing reductions in the city’s structural budget, cutting 530 positions, including 200 layoffs. That’s less than the $96.5 million Sanders would save with one-time changes, such as suspending contributions to the reserve fund in 2011, restructuring payments on a $39 million lawsuit settlement, and delaying installation of fire sprinklers at the city administration building.

“While we will not raid our reserves to balance our budget, we’re not making additional contributions to those funds during this crisis,” Sanders said. He said the city will continue building its reserves once the economy recovers.

The city currently has reserves of about 7% of the $1.1 billion general fund.

Sanders said much of the pain of the economic downturn is expected to be temporary, justifying the use of one-time fixes to close a portion of the budget deficit. He attributed $67 million of the gap to reduced tax revenue and $57 million to additional pension costs caused by a decline in the stock market.

Closing the entire gap with permanent spending cuts would require cutting discretionary spending by more than 25% and force the closure of 20 fire stations, the firing of hundreds of police officers and firefighters, and the shuttering of 11 libraries, among other cuts.

Instead, Sanders would reduce some library schedules to three days a week, eliminate eight fire engine companies through rotating closures of firehouses, eliminate the police equestrian unit, reduce police canine units, and other cuts.

The City Council is expected to take up the budget in early December and to vote by mid-month. While the exact contours of the service cuts are sure to be the subject of debate, Council President Ben Hueso called Sanders’ proposal “workable.”

“I am committed to joining the mayor and the council in making tough decisions to close this unprecedented budget gap,” Hueso said.

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