The anticipated deficit is $149.5 million higher than projected six months ago, when the city expected a $500,000 surplus for the fiscal year beginning July 1, 2004.

Mayor Street’s top aides blamed the projected shortfall on increasing pension and health-care costs, and slower-than-projected revenue growth.

But City Controller Jonathan Saidel said data collected by his office did not suggest a shortfall of that magnitude. Indeed, tax revenue is running above projections this year, according to data from the city and the Controller's Office.

While the City Hall press conference to announce the shortfall is an unusual move by the Street administration, the mayor's aides presented the cuts as a continuation of the governmental restructuring he first announced last year.

Some city facilities could be cut and layoffs could occur, the aides said.

With revenues expected to remain flat and pension and health care costs rising, the cuts are needed to balance the $3.2 billion budget that begins July 1, officials said.

Street hopes to maintain core services like trash pickups and snow removal at current levels and provide a "compassionate" level of care for children and the disadvantaged, Managing Director Phil Goldsmith said.

Beyond that, no departments — including police and fire — are considered sacred, Goldsmith said at the press conference, which the mayor did not attend.

The cuts will require "some imagination on our parts as managers and some political will — political courage — by those who approve our budget," said Goldsmith, referring to the 17-member City Council.

The departments were asked to cut a combined $115 million, while the administration will seek another $35 million in savings citywide.

Officials said they might consider self-insurance to contain rising health costs or consolidate staffs when duties overlap.

Sharp reductions in the city’s vehicle fleet are planned, and staff vacancies may go unfilled.

"When you’re looking at a cut of that magnitude, you have to look at people," Finance Director Janice D. Davis said.

The budget does not contemplate pay increases other than those included in the current labor contracts, or reforms of the city’s tax structure.

Goldsmith denied the austere budget talk was related to the upcoming contract talks.

The budgets of some city agencies, including the court system and City Council, are not controlled by the mayor and therefore not included in the proposed cuts.

Street is scheduled to make his formal budget address March 18.

No deficit was expected six months ago, when the city projected a surplus of $500,000 for the fiscal year starting July 1, 2004.

The shortfall, and hence the belt-tightening, was announced at a City Hall news conference eight weeks after Mayor Street's reelection. Exact cuts, which will include the Police and Fire Departments, have not not yet been determined.

Street was not present at the announcement, but city Managing Director Philip Goldsmith acknowledged: "There will be some screaming... and some pain."

As Street first warned last year, some city facilities could be cut, and layoffs could occur, the officials said.

Underused recreation centers and some fire stations are considered to be prime candidates for closing, but Goldsmith said no specific cuts had been determined. He and city Finance Director Janice Davis, who also was at the news conference, described the cuts as a continuation of the restructuring and downsizing Street announced last year.

Some parts of city government "have been structured the same way for the past 100 years," Goldsmith said.

"We no longer have time to put these issues aside," Goldsmith said.

During the 20th century, Philadelphia was built to house and serve more than 2.1 million people, but the city now has a population of about 1.5 million.

Department heads will submit new spending plans in February based on their reduced allocation, and Street will present a budget proposal to City Council on March 18.

"Core" functions of each department are not supposed to be proposed for cuts, Goldsmith said.

Dubow said the city had warned there were fiscal pitfalls ahead. "We said... here are a lot of risks, and a lot of the things we identified are what actually happened... . I think we were pretty up front about that."

Goldsmith and Davis stoutly rejected any suggestion that the budget warning was intended as a message to the city unions whose contracts expire next year. Pay raises for those employees are not included in the projected deficit. Wages make up nearly 60 percent of the city budget.

Yesterday, Police Commissioner Sylvester M. Johnson said Street budget officials had not yet given him his new budget target, but he said: "We are not going to reduce public safety."

"We are in the process of restructuring anyhow, prior to this news conference today," to increase the number of officers deployed on the street. "I don't think we will be reducing personnel, but I will have the responsibility for restructuring."

Johnson has also been attempting to reduce police overtime used on Operation Safe Streets, but no information was available on whether the new budget would force larger cutbacks.

So much for holiday cheer.

The grinches who inhabit the Street administration's upper reaches set aside their mistletoe and egg nog yesterday to announce the city is facing a $150 million deficit in the budget that begins July 1.

To cope with the red ink, Janice Davis, the city's finance director, said city departments were informed yesterday that they must slash $115 million from their budgets. An additional $35 million will be cut in other areas of the budget.

And all of this is happening before two major demands on the city budget: A powerful coalition wants steeper tax cuts and three of the four city unions have contracts that expire June 30.

Managing Director Phil Goldsmith says the city's in for "tough financial sledding," and that there will be "some screaming, some kicking, some pain."

So, as the city waits to see if a federal grand jury hands down indictments by spring in connection with the far-flung corruption probe of city government, Street and City Council will likely be engaged in a bitter battle over how to balance the budget.

Street's budget team will work with department heads to preserve what they call "core services" while reducing their spending plans.

The mayor, who will be inaugurated Monday, is set to outline his budget on March 18, almost two months later than has been done for the last decade.

The cutting won't be an across-the-board affair as the city managers did this year, Goldsmith said. Big departments, like police, streets, fire, health and human services, are facing bigger demands for retrenching. Overall, the average departmental cut will be in the 8 percent to 9 percent range, he said.

As for closing facilities like libraries, rec centers or fire houses, Davis said, "We're not laying out a 'close this, don't close that' scenario now." Instead departments have been told to use their "imagination, leadership and creativity."

Police Commissioner Sylvester Johnson, who late yesterday still hadn't seen the so-called "target budget" he's supposed to work from, said he'll reduce spending by making "substantial reductions" in the higher ranks and will halt promotions to captain and above.

Recreation Commissioner Vic Richard III said he's considering the closure of some older facilities and the transfer of staffers to newer centers.