As city budget officials throughout the region sat down last spring to prepare their spending plans, the subprime mortgage crisis was spreading and the future looked bleak.

So most used what they thought were conservative estimates when projecting how much money their cities would have to spend this year.

If only.

The ever-widening financial meltdown is making even conservative budget projections seem wildly optimistic. As a result, area officials already are brainstorming ways to save even more money and looking ahead to cuts that could come shortly after the new year.

"There is no community that is sitting back, immune to what is going on right now," said Kerry Miller, Folsom's city manager. "There may be some program areas we need to cut back or eliminate."

Depending on the numbers, Miller said, he could see the city "engaging in almost a new budget process."

Rancho Cordova's sales tax projections were likely about 4 percent too high. Citrus Heights officials expect sales tax to come in 6 percent less than last year. And, in Folsom – where staff projected sales tax revenue would remain flat – city officials now anticipate as much as 10 percent less, a shortfall of $2 million.

Lagging sales tax receipts are particularly troubling for municipalities, which rely heavily on such revenue to fund services such as law enforcement and community development. About 22 percent of Rancho Cordova's general fund revenue comes from sales tax, compared with 36 percent in Citrus Heights and 30 percent in Folsom.

Cities' finance staffs are busy planning for a future that is far from certain as market volatility continues and the state looks to plug its own multibillion-dollar budget shortfall.

"You don't know what the state is going to turn to, to balance the budget," Miller said.

A month ago, Rancho Cordova officials asked all city employees to share cost-saving ideas, said Donna Silva, that city's finance director. The city received hundreds of suggestions, and staffers are reviewing them to see what's feasible.

Ideas include selling advertising on the city's Web site and increasing the rental of city property for meetings, weddings and even funerals.

In an effort to control costs, Folsom has a freeze on hiring and discretionary spending, Miller said. But even that won't be enough to close the budget shortfall, which could be as much as $5 million for the current year if the city were to do nothing.

Folsom city staff should have recommendations for the board regarding budget adjustments after the first of the year, he added.

One of the big questions municipalities will face is how much they should use reserve funds to cover shortfalls rather than making cuts.

The answer will depend in part on how much a city had saved for tough times.

Both Citrus Heights and Rancho Cordova have sizable reserves.

Because they contract out services and have smaller work forces than older cities, their budget officials don't foresee layoffs and might not have to make deep program cuts.

Folsom started the year with undesignated reserves equal to about 13 percent of annual general fund expenditures.

Citrus Heights had more than a year's worth of general fund expenditures in both restricted and unrestricted reserves.

Whatever the cities do to weather the economic storm, residents are sure to feel the effect, said Eva Spiegel, spokeswoman for the League of California Cities.

"These things have a real and immediate impact on people," Spiegel said. A recent, albeit extreme, example she pointed to is Vallejo, which cut law enforcement after filing for bankruptcy reorganization. That city has already seen an increase in crime as a result, she said.

"Cities are having to make real tough choices that are devastating to the residents that rely on them," Spiegel said.

Miller, Folsom's city manager, saw the economic turmoil after California revamped its property tax system in the late 1970s, after the Persian Gulf War of the early 1990s, and post-9/11.

"Those all pale in comparison to what we're dealing with right now," Miller said.

And his advice for people hoping to ease the cities' budget woes?

"Shop local. Now's the time to buy cars," he said.

Call The Bee's Robert Lewis, (916) 321-1061.