One City Hall observer recently described the budget process in Ann Arbor this way: It seems every year, there’s a fiscal crisis, and then at the last minute, the city administrator pulls a rabbit out of the hat.

Last year, the rabbit was parking revenue steered into the city general fund to minimize what would have been deep cuts in the police and fire departments. This year, there is no rabbit. The Ann Arbor City Council faces nothing but hard choices in the budget it will vote on Monday, and the fiscal conjuring of the past has been used up. This is going to be painful.

The city faces a $2.4 million deficit in the coming fiscal year, and the proposed budget calls for the elimination of 48 positions, including 20 in the police and fire departments. Unpalatable as these cuts are, City Council has little choice but to make them. Past actions - or inactions - have burdened the budget with crushing operational costs and debt, which we don’t see being resolved in the current budget cycle.

Even as the city suffers brutal cuts, the time is long overdue for City Council, the administration, city employees - and yes, taxpayers - to make the tough choices and to determine what our true priorities are. Otherwise, future budgets will bring nothing but more of the same.

Public safety

For the coming fiscal year, the most untenable position we find the city in is facing deep cuts to the Fire Department without a clear understanding of what the impact of those cuts will be on public safety.

Not that we aren’t concerned as well about the 13 positions likely to be cut from the Police Department this year. But unwelcome as those reductions are, at least Police Chief Barnett Jones is offering City Council some assurance that he can reduce administrative positions and make other adjustments to keep the same number of “feet on the street.’’

Such is not the case with fire protection. The city is having a study done on “current and future deployment of staff and resources’’ in the Fire Department. But the results won’t be available until this summer, while seven firefighter positions are being cut now. We find it irresponsible for the city to be making such deep reductions in such an essential service without the information it needs to understand the full implications, yet that is the position City Council finds itself in. This study should have been undertaken sooner. At the very least, the upcoming budget should include some contingency for dealing with the possibility that the study finds fire protection being compromised in a way that is unacceptable.

Human services

The proposed budget calls for a 10 percent reduction in funding for human services, or about $116,000. This is really a matter of what a community values. Ann Arbor remains one of only two cities in Michigan that still provide funding for human services. One could argue that budget realities being what they are, it’s time for city government to get out of the practice of funding human services.

We’d argue the opposite. Now is a bad time to cut in this area. Given how serious the human need is in our community right now, and how cash-strapped local agencies are, a $116,000 cut does little to reduce a $2.4 million deficit, yet it would be a disproportionately heavy blow to local agencies and the needy people they serve. We’d look elsewhere for savings and retain the human services funding that reflects the kind of community that Ann Arbor is.

City golf courses

We cannot see anywhere where the city’s spending priorities are more out of whack than in the way it continues to lose $300,000 a year or more on its golf courses while it lays off police and firefighters and cuts funding for the needy. The two city-owned golf courses are wonderful assets, but even though their financial performance has improved, they continue to lose hundreds of thousands of dollars a year, with no potential of breaking even in the foreseeable future.

In January, City Council was presented with options for closing Huron Hills as a golf course and converting it to some passive use, such as walking trails or a nature area. But council seems to think that the costs associated with converting it would not result in enough savings to justify the move. To us, this is a prime example of past inactions continuing to tie the hands of decision-makers today. In 2007, a consulting study made a very clear case for shutting Huron Hills. If council had acted then, the city would be in a better position today.

We have nothing against golf or golfers. But let’s grasp reality here. While two golf courses continue to suck money out of the general fund, we’re already closing fire stations on a rotating basis, with more cuts in fire services to come. City Council should either commit to operating a single golf course that has the potential to break even, or get out of the golf business altogether.

Overall spending on parks

A more recent issue in budget discussions has been the concern raised by the Park Advisory Commission that if the city goes ahead with plans to cut some $270,000 in spending on parks and recreation, it would violate a policy approved by City Council in 2006. That policy, passed the same year that voters approved a parks millage, said the city won’t cut park funding by a greater percentage than it cuts general fund spending in any given year.

City Council members acknowledge that the cuts they are contemplating to parks operations, as well as to a separate parks and recreation budget, would violate the policy to the tune of $90,000. So they either need to cut $90,000 elsewhere or amend the policy. We recommend the latter. The policy, while well-intentioned, didn’t envision the kind of severe layoffs already being proposed in police and fire. What’s more, council members point out that the spending reductions are being achieved through cost-savings, rather than service cuts, so the policy in effect punishes the city for operating more efficiently.

As much as Ann Arborites cherish their parks, there’s a bigger picture here. City Council has got to have the flexibility to make spending decisions based on a weighing of all the city’s needs. To the extent that this policy constrains council from setting priorities and putting scarce resources toward the most vital services, it needs to be amended.

Employee benefit costs

The city desperately needs to get this one solved. It’s well-documented that the benefit packages for some employee groups carry costs that are no longer in line with what any employer, public or private, can afford to pay. Police, firefighter and AFSCME employees pay no co-insurance costs and no monthly contribution toward their insurance premiums. The city has been trying, without success, to get them on a less costly plan that other city employees are covered by - a move that, along with some other changes in benefits, would save an estimated $800,000, about a third of the entire budget deficit.

We urgently call upon city employees to recognize the severity of the budget distress, and negotiate concessions that reduce the city’s costs for providing health care. We hope this is what occurs, but if it doesn’t, then that only underscores the importance of the state reforming Public Act 312, so that the city has leverage to compel more reasonable benefit costs for public safety employees. We’ve previously called for revisions of PA 312, and renew our call for such reform. Lower benefit costs would not eliminate police and fire layoffs, but would reduce them, and saving even some of these positions can only benefit public safety. One way or another, this bleeding of the city budget cannot continue. Health-care costs have to be reduced.

The challenges ahead

When you look at the proposed budget for fiscal 2012, it’s alarming how deeply under water the city is. Even with harsh cuts in police and fire, it’s still only achieving a balanced budget by shifting just under $700,000 in current general fund expenses - such as forestry - into other funds, and by dipping into its fund balance for $1 million. These are not perennial solutions, and the more you shift out of the general fund to cover a deficit for one year, the more deeply you have to cut police and fire in the future to achieve the necessary savings.

With little likelihood for an economic turnaround in the near term, City Council will have to make some incredibly tough decisions on Monday, and yet even harder work remains ahead. The cost of employee benefits need to be brought in line, and the city has to tackle such basic questions as whether it can continue to offer health care to future retirees. But even addressing these issues would not, by themselves, balance future city budgets, and the city can’t keep slashing services year after year.

The time has come for this city’s elected leaders and its residents to engage in a discussion about what level of service we want, and what we are willing to pay for it. Simply put, it’s becoming increasingly hard to see how the city can climb out of a perpetual budget hole without additional revenue.

Any proposal for a tax increase would be complex and controversial - more so than we can address properly today, though we plan to devote an upcoming editorial to it. But it’s essential that City Council begin talking about it now, and not wait until the next budget cycle.

Either we as a community must have that discussion - and sooner, not later - or face the probability that city services will continue to shrivel to an extent that most residents would find hard to comprehend and even harder to accept.