Disappointing tax revenues and an unpredictable state budget will result in further reductions to city services beyond the cuts to police, fire, and libraries announced last month, city Budget Director Stephen J. Agostini said Tuesday.

Agostini wrote department heads on Friday informing them that their 2010-11 budgets would be reduced 2 percent. He also told them he was freezing purchases of equipment, materials, and supplies immediately. Instead, he is holding $13 million to $14 million remaining in the 2009-10 budget for such purposes "to help conserve necessary cash."

The letter refers to the same cash-flow problems that Mayor Nutter complained about in response to City Council's $3.9 billion budget, which passed May 20. Agostini has said that the city would run out of cash by June 2011 under that budget.

Nutter had pushed for $14 million in additional revenues in 2010-11 through a tax on sugar-sweetened drinks, or through raising property taxes 12 percent instead of the 9.9 percent hike approved by Council. Council refused.

Nutter then quickly announced $20 million in cuts, including the cancellation of two police recruit classes, the reduction of branch-library schedules from five days to four, and the elimination of two fire companies.

Those cuts have yet to be implemented. Some Council members question whether Nutter will carry through on his promise, though Agostini said he expected to implement those changes by July 1.

The reductions ordered by Agostini are new and separate from those plans.

This round is driven by different, but still familiar, factors. First, revenues, specifically real estate taxes, are not meeting budgetary projections, Agostini said. Property-tax projections for 2009-10 are down $14 million, he said.

Political stalemate

Agostini said he also was concerned that state funding would be held up in a political stalemate, as it was last year, or would be reduced from the levels specified in Gov. Rendell's spending proposal.

The city suspended payments to some vendors last summer, during the state legislature's 101-day budget standoff with Rendell that held up state funding that the city depends on.

"It is a proactive measure to stay on top of what has become an increasingly deteriorating situation," Agostini said. "In order to have a chance to end [fiscal year] '11 with a balanced budget and one that addresses our cash-flow needs, we felt it was prudent to get on top of that right away."

'Hard hiring freeze'

Councilman W. Wilson Goode Jr. said the administration's proposal "was not necessarily a new development" because last fall, the Nutter administration had asked department heads to come up with proposals for cuts of 2.5 percent, 5 percent, and 7 percent as part of budget planning.

Goode also said the administration's decision two weeks ago to impose a "hard hiring freeze" - meaning no hiring except for emergency situations - was similar to Council's recommendation that the city not fill vacant posts.

Before the freeze, Nutter had been filling some spots, but only after reviews to determine whether they were absolutely necessary.

Departments will still be able to spend on supplies and equipment, but only with Agostini's approval. And, Agostini said, he will review the 2 percent cuts proposed by each department, and not every department will be affected equally. Agostini would not say how much would be saved with the new cuts.

Contact staff writer Jeff Shields at 215-854-4565 or jshields@phillynews.com.