Burlington Township Mayor Stephen George delivered a somber message at the first council meeting of 2009.

Saying budget rules from Trenton had "strangled" the township's economic future, he vowed: "This financial dilemma was not created here but must be resolved here."

Two dozen municipal employees received layoff notices this month, as the township of about 21,000 people faces a $1.6 million revenue shortfall in what local officials and a union leader describe as an unprecedented shakeup.

Though perhaps extreme, the township's experience offers a look at the challenges local governments face with declining revenues and a 4 percent cap on the increase in the amount of taxes to be raised to support the municipal budget.

Pemberton Township, also in Burlington County, is considering layoffs and issued a memo to municipal employees on Jan. 6 that cited difficulties posed by the tax-levy cap and that said the municipality would work with union leaders to minimize job losses, even as the "problem is a serious one."

But Gov. Corzine has told local government officials that raising taxes beyond the state-imposed limit in an economic crisis would be unacceptable. Still unknown is whether the state will approve a plan he proposed last year for towns to cope by deferring pension payments.

Burlington leaders blame the layoffs on the state-imposed cap that became effective in 2008, saying scrapped real estate deals, the declining addition of tax ratables, less revenue from fees and permits, and a smaller surplus have created a budget hole that is difficult to fill without hiking taxes above the limit.

Meeting the cap allows the township to raise only an additional $238,000 in municipal taxes, business administrator Kevin McLernon said.

Now the township is moving to privatize trash and janitorial services, which officials hope will save costs on wages and benefits. A full-time truck driver at the highest rate makes $26.52 an hour, for instance, and a senior building maintenance worker can make as much as $27.54 an hour, McLernon said.

The municipality has already reduced hours at its recycling center, frozen nonunion personnel salaries, and reduced the salaries of the top six wage-earners by 2 percent, according to officials. George, a local public official for more than 30 years, said he reduced his own salary by 20 percent, to about $11,000.

And for the first time, he said, Burlington will charge the approximately 4,000 youths a year who play sports on township recreational fields $30.

John Lazzarotti of the Communications Workers of America Local 1034 called it "by far the most serious layoff situation I've seen . . . never have we had, at least in my recent recollection, a situation that carried this much of an impact."

But he questioned why the township was claiming a $1.6 million shortfall now, after saying nothing during union contract negotiations in the fall. Municipal leaders knew about the 4 percent cap then, he said.

"You don't just wake up one morning and say, 'I think we're going to privatize the trash services,' " said Lazzarotti, who is assistant to the president of the local. "Somebody had to know this for some substantial period of time."

The bids for janitorial services and trash collection are due later this month and February, respectively, so it isn't even clear what the savings would be, Lazarotti pointed out. But the township said it was obligated by the state to notify employees 45 days in advance of layoffs and couldn't afford to wait to see whether the bid process was a success. Officials could scale back layoffs depending on the bids they receive.

"Obviously, it's shaking up people in Burlington Township the most - but you're not going to tell me there's not a lot of other places looking at this to see how it's going to play off . . . adding to the unemployment rolls is not good and it's not going to help the economy any," Lazzarotti said.

George, who talked about the town's finances at the Tuesday reorganization meeting, insists the township negotiated with the union in good faith, and pointed out a number of failed deals that could have covered the shortfall.

The township planned to sell land for about $6 million to a local builder who planned an age-restricted development, but the company backed out of its agreement last year, citing the weakened housing market, the mayor said. And the township was set to sell another property for $1 million to a company that backed out recently when financing fell through, he added.

Pemberton Township Business Administrator Christopher Vaz cited Burlington Township in his recent memo to employees, noting that their own township would "join other local and county governments . . . that have been forced to reconsider reorganizing operations in conjunction with a reduction in force."

He said in an interview the township could lay off as many as 20 people to address issues similar to Burlington's, though nothing is certain.

"It's a tough, tough position for the town to be in, but I can tell you that this is something most municipalities are going through," he said.

Contact staff writer Maya Rao

at 856-779-3220

or mrao@phillynews.com.