As the city is expecting a $2 million shortfall the next fiscal year, it will charge community groups such as Las Madres and 4-H clubs for using the Monta Vista Recreation Center, and programs such as Leadership Cupertino and Shakespeare in the Park will be suspended. The city will stop sponsoring festivals and ethnic celebrations, and it will take the city longer to replace broken streetlights and repair roads.

"Our sales tax is down $400,000 and still declining, but our expenditure is increasing," said Carol Atwood, director of administrative services. "We have to cut services and find ways to increase revenues."

Unlike some cities whose budget shortfall results from shortsighted and irresponsible spending, Cupertino has been known as a fiscally conservative city. During the past 10 years, Atwood and the city have won numerous awards for careful budget planning and accurate budget forecasting. Even with the dot-com bust, Cupertino has avoided layoffs.

However, the city won't be able to keep the cuts invisible due to a series of actions by the state and the continuing loss from sales and hotel taxes.

When Gov. Arnold Schwarzenegger terminated an increase in vehicle-licensing fees, he also cut $800,000 from Cupertino's already trim $30 million budget. In addition, the state will take away $130,000 from Cupertino's property tax to balance its budget. Starting in September, the state will hold 25 percent of Cupertino's sales tax—about $2.5 million—as a result of the passage of Proposition 57.

On the local level, sales tax revenues continue to drop, as Cupertino's sales taxes mostly come

from high-tech industries. The cost to the city of its employee retirement plan has gone up by 6.42 percent, which accounts for $650,000, and the Sheriff's Department, with which Cupertino contacts for law enforcement, wants to open its agreement one year early and hopes to raise the service fee by $1 million more.

"Cupertino currently pays $6.5 million a year. Although we save a lot of money by contracting with the Sheriff's Department, it is still a large portion of our expenditure," Atwood said.

The city is trying to save money at both the state and local levels.

To prevent Sacramento from taking more money from local governments, Cupertino has recently joined some 30 other cities to support a ballot initiative that requires voter approval before the state may take local tax funds.

Every city department has undergone a 15 percent cut during the past three years. A total of 10 positions, including the social worker position at the senior center and five of the city's maintenance crew, are on hold. The library might be closed on weekends, and the annual appreciation party for the city's commissioners is downgraded from a formal dinner of steak and wine to a casual get-together of cookies and coffee.

"We have been very creative in cutting our expenses and generating revenues," Atwood said.

The council has been very supportive of the staff's various creative proposals, except for a few.

Despite the staff's objection, the city council is adamant about bringing the Fourth of July fireworks back for fear that some residents will accuse them of being unpatriotic. The 20-minute performance will cost the city $55,000.

But the council is reserved about imposing a monthly fee on telephone service subscribers for their 911 connection. Right now, Cupertino pays some $771,000 annually to the County of Santa Clara for the 911 system. If the city council adopts an ordinance to have subscribers pay for their share, telephone service providers will collect fees from customers and the money will go to the city. Atwood estimates residents will pay between $1 and $1.50 a month and businesses will pay $13.

"This is an infrastructure fee. It doesn't charge each call," Atwood said.

Nearby cities and counties, including Santa Cruz and Watsonville, have adopted similar ordinances.

But Mayor Sandy James said she feels uncomfortable about imposing such a fee.

"The city's primary responsibility is to protect its citizens," James said at the council's April 19 meeting. "I don't feel right about charging people for calling 911. We should make cuts elsewhere."

Councilwoman Kris Wang suggested asking subscribers to share only a part of the expense.

The staff will present the plan and other expense-cutting proposals to the council again at its May 26 budget study session.

Whether to charge residents for their 911 service is just one of the many difficult decisions the council will have to make to balance the city's budget. In the meantime, festival organizers such as Lucille Honig of the Cherry Blossom Festival are worried about whether they can put on their events next year without the city's help.

"We have focused on making this year's festival successful and haven't had a chance to figure out what to do," said Honig, co-chairwoman of the Japanese festival. "We understand the budget crisis and it's going to be difficult for us. But we will do everything we can to preserve the program."