CHAMPAIGN – City budgeters expect it is "very likely" they will need to cut at least another $1 million from this year's fiscal plan, and officials are hoping it will have a minimal impact on services.

But if revenues continue to decline as they have for the past several years, then the budget gap could grow, and residents may start seeing reductions in city services, said Finance Director Richard Schnuer. City administrators have started reviewing each individual department's budget and are developing a contingency plan for up to $6 million in cuts if necessary.

Personnel costs, particularly union pay increases and rising health insurance costs, are expected to become more of a burden on the city budget than officials estimated when they cut $2 million earlier this year.

City officials this month agreed with one of four city unions on a two-year contract that includes a 1 percent pay increase each year.

Administrators now are negotiating contracts with the city's police and fire unions, and Schnuer said it is likely they would get an increase, too.

A fourth union, which represents the city's public works employees, is working on an existing contract that would give them a 3.25 percent pay increase. City officials asked that union to reopen negotiations, and the union declined, Schnuer said.

The city council adopted a budget in June that decreased spending by $2 million, and at the time, officials did not expect those cuts to have a significant impact on services that residents perceive. But compound that with the nearly $9 million worth of budget-balancing measures that have been made over the past several years, and Schnuer said the city is "right on that cusp" of affecting services.

The city's budget situation has become so serious that officials have already saved and spent a $500,000 "rainy day fund."

Any more than $1 million in cuts before the end of this year, and residents could start noticing the impact, Schnuer said.

"The $1 million, we could probably do that without significantly impacting services," Schnuer said. "$2 million, of course" services would be affected.

Decisions as to exactly where those cuts might be made have not been determined, and officials will have a somewhat better idea of what to expect after state elections in November.

Gov. Pat Quinn earlier this year proposed cutting by 30 percent the income tax revenue that the state shares with local governments. That alone would be a $1.5 million to $2 million slash to the city's revenue, Schnuer said.

"The state's financial situation is such that it's hard to know what they'll do," Schnuer said.

Such a decrease in revenue would almost certainly affect the level of city employees, Schnuer said, but it is not yet clear if that means layoffs or furloughs.

If the cuts are minimal, budgeters could lower costs through attrition, early retirement, eliminating vacant positions or cutting overtime. Some of those measures may need to be bargained into union contracts.

"First, we need to talk about where we want to reduce," Schnuer said. "Then we'll talk about how."