SOUTH BEND — South Bend City leaders took the first step toward formulating next year's spending plan, by giving a preliminary green light to next year's budget. So far, it contains a 0.4% increase in spending, and no cuts. But, will it stay that way?

The "baseline" budget recommended unanimously by the Common Council Monday includes full funding for all departments at 2008 levels. It also includes a 2% across the board raise for all city employees, including Teamsters Union employees, and new 1 year contracts with the city's police and fire departments.

Under the terms of those contracts, approved Monday night by the council, police officers will receive a 2.2% wage increase. Firefighters will receive a 1.65% wage increase. Firefighters with who have obtained a rank of "1st Class" will receive a 2.0% increase.

The police and fire contracts each passed by an 8-1 vote, with Council President Timothy Rouse representing the lone vote against the deals.

"We simply do not have the money," Rouse told the Council. "I admire the work our police and firefighters do, but we don't know what our financial situation is. Giving raises, that will compound--because, they're not going to come back and ask for less next year--is irresponsible at this time."

Rouse also took issue with the fact the new contracts eliminate funding for the police department's "operation safe neighborhoods" program, in order to give officers an extra $200 each to pay for uniforms.

The operation safe neighborhoods program provides a stipend to officers who agree to live in certain areas of the city.

It's a simple case of supply and demand, says Rouse. If the increases were pulled back, the program could have been kept. 12-15 additional officers/firefighters could have been kept if the departments' salaries remained flat.

The raises to police officers and firefighters amount to about $600,000, according to South Bend City Controller Catherine Fanello.

But she says, Rouse's plan isn't realistic.

"We need to retain good public safety. And if we're not giving them increases, they're going to go elsewhere. And, I don't think that's what the city of South Bend wants," Fanello said.

But, the city's overall budget situation is much more complicated, because much of it remains unknown.

From the very beginning, the public hearing on next year's spending plan was billed as "wishful thinking."

"It's an outline from which we will start making those cuts," said Fanello. "Even though 2009's budget is virtually a mirror image of 2008's budget, keeping it that way, will be a challenge Fanello isn't sure the city will win.

"It's not very realistic," she admitted. "I think cuts are before us. It's just now deciding what those cuts will be."

As Indiana's new property tax caps begin to take effect in 2009 and 2010, no one's quite certain exactly how much funding the city will lose.

But everyone seems to agree, the final figure will be staggering. Some estimates put the number in excess of $18 million per year by 2010.

Even so, Mayor Steve Luecke says he's still holding out hope that some new form of revenue can be found to minimize the damage, and that's why the Council will be working off the "baseline" budget to cut "piece by piece."

But whatever funding increases are found, won't make up all the losses.

"There are small increases we can make. But it won't even come close to making a dent into $18 million," Fanello said.

There is one option that would, though: a boost in St. Joseph County's local option income tax, or LOIT.

"That's the only tool the legislature has left us to make up this deficit," said Mayor Luecke.

The county's LOIT could be increased by an additional 1.45%, to a total of 2.25%, including a new 0.25% tax exclusively to fund public safety.

That would essentially offset the loss of property tax dollars, and minimize any cuts to city and county programs or personnel.

But there's a catch: South Bend lawmakers can't pass the plan alone. At least one other Council has to sign off on the plan too.

"I expect that conversation will be had yet this year," said Mayor Luecke. "It will be up to the three councils-- South Bend, Mishawaka, and St. Joe County, to determine whether or not we need those revenues to continue providing these key services, or whether we want to cut muscle and bone."

If that conversation doesn't happen, cuts are simply inevitable, says Luecke.

Starting in 2009, city swimming pools could be closed at least one day a week. School crossing guards would be cut completely. After school programs like the ones at the City's Martin Luther King, Jr. Center and Charles Black Center would be eliminated.

In 2010, the cuts get dramatically deeper.

Click on the links in the "related content" box above to view the city's proposed 2 year cuts.

News of the impending chopping block Monday had kids and volunteers at the King Center planning for an uncertain future.

"It would be a tragedy," said volunteer Janice Miller, a volunteer at the Center for more than 30 years. "This place is our community. It was just renovated 4 years ago. The kids wouldn't have any place to go. The crime rate would go up, because the kids wouldn't have anything to do. They'd be pushing kids out the door and onto the streets."

But city leaders say they may not have a choice.

Even if an income tax hike is passed, the money likely wouldn't help in time to stop at least some cuts from going through.

"It would have to happen by the end of the year in order to gain revenue," said Mayor Luecke. "And not really even for 2009. We're really looking at generating revenue to support the 2010 budget. Some of those other things that are not core city services, probably are gone."

That left a group of about 30 crossing guards, in full uniform at Monday's meeting, with a clear message.

"It's a done deal. We're out," said Sandy Dreibelbeis, a crossing guard for the last 25 years. "They don't want us, but they need us, but no one wants to pay for us."

Even so, Dreibelbeis, and--for that matter, Lueke-- haven't abandoned hope.

"We're not [giving up,]," Dreibelbeis said.

"There's still a lot of difficult decisions ahead of us," said Luecke.

Those decisions will start with a more "formal" meeting between all 3 of the councils to decide if an income tax hike is a realistic move.

No date has been set, but they won't have much time to talk once it is.

The South Bend Common Council still plans to take a final vote on next year's budget at the end of October. St. Joseph County's final budget vote will follow shortly after.