California county officials are nervous.

Gov. Arnold Schwarzenegger is expected to announce a special legislative session Wednesday to address a state budget shortfall of at least $10 billion.

County officials, already facing nearly $700 million in budget cuts this fiscal year, fear the worst.

"It's going to be really bad," said Jean Hurst, a legislative representative for the California State Association of Counties.

Hurst said association leaders had a conference call with the Governor's Office on Friday afternoon.

"They wanted to prepare us for some ugly cuts," she said. "They said it would be painful."

Further budget cuts could mean fewer police officers, delays in road improvements, staff reductions in health and employment programs and less money for parks and libraries.

"Everything's on the table," Hurst said.

Many counties, facing decreased revenues because of state budget cuts, stagnant property tax rolls and plummeting sales taxes, are reopening budgets to make additional cuts.

Riverside County is planning to cut 25 percent of its budget over four years, and Santa Barbara County has instituted mass furloughs for employees.

Regionally, El Dorado County officials say dealing with budget shortfalls has become a constant. The county eliminated 17 positions last month and today will conduct hearings to consider eliminating 11 more, as well as increasing fees in its Senior Day Care Program.

"We're going to be continually cutting this budget until next summer," said El Dorado County Auditor-Controller Joe Harn.

The county took $15.5 million from its savings to balance this year's $524 million budget and needs to make cuts to help it through the next fiscal year.

"We don't have anything in reserves to do that next year, and next year looks worse," Harn said.

The biggest problem is plummeting sales tax revenue, he said. "Taxable sales are going down across the nation. People are buying what they need, not what they want."

El Dorado County officials estimate that the 2009-10 budget will be $19.8 million out of balance if spending isn't cut. "That assumes the state does nothing to adversely affect us," Harn said.

Yolo County officials also are worried about the state's actions. They are working to resolve a $3.5 million budget shortfall in their $350 million budget and a possible $19 million gap next year, said Howard Newens, Yolo County auditor-controller and treasurer-tax collector.

Additional state budget cuts "will surely exacerbate our problem," Newens said.

Yolo officials may offer employees a range of voluntary options, including partial retirement, deferral of cost-of-living adjustments, flexible schedules and furloughs.

Placer is in a more comfortable position. Spokeswoman Anita Yoder said a $23 million deficit in the county's $865 million budget was filled by reducing expenses.

County officials realized in the summer of 2007 that "the situation didn't seem as rosy as in the past" and started to make cuts, she said.

The county avoided major purchases and asked departments to reduce spending.

Yoder said the layoffs of eight employees in July reflected the need for fewer building inspectors because of a downturn in the housing market.

Sacramento County managed to close a budget deficit of $123.7 million in its $902 million budget. As a result, county safety-net programs took deep cuts, translating into a reduced ability to investigate child abuse claims, less job assistance and reduced services to the mentally ill.

County officials now are waiting to see what the state will do next.

"We can't predict what is going to happen, but we're keeping a close eye on our revenue and expenses and how they may be affected next year," said Sacramento County spokesman Zeke Holst.

In recent months California counties have found their finances even more strained as they scurried to cover the cost of state programs. The state Legislature voted to defer $1.8 billion in payments for those programs earlier this year.

Those low on cash were forced to borrow from county treasury pools at a cost of 3 percent to 4 percent, said CSAA's Hurst. She said the total cost to borrow the money won't be known until year's end.

Counties took the brunt of the $1.8 billion in state deferrals to local government agencies, waiting for $1.27 billion in funding. This amount does not include various deferrals of Medi-Cal payments, according to Hurst.

Most were paid in September, although agencies still are owed $199.7 million in mental health managed care payments.

County officials are hoping there won't be deferrals next year.

"With the economy and the turmoil in the market, we know a cash deferral similar to this year's will be very difficult to manage," Hurst said.

Call The Bee's Diana Lambert, (916) 478-2672.