In Hall Monitor this week, I promised I'd share the full (actually slightly edited) transcript of my interview with the city's newly freed budget director, Andrew Scott. It's wonky, sure. But you should read it.

Scott is unsung but very important referee in the Portland City Council's annual budget dance marathon. His team is in charge of helping bureaus prepare and refine their budget requests—while also helping city commissioners gingerly step their own way through the piles of financial bullcrap that those same bureaus like to pile up every spring.

Like I wrote in the column, Scott and his team's expertise used to be kept in the mayor's back pocket exclusively, used to advance the mayor's aims—a tactic Sam Adams famously wielded to the great frustration of some of his colleagues.

Until City Commissioner Amanda Fritz got her way and sprung them all loose last year, Scott and his team were just another cog in the opaque Portland Office of Management and Finance.

They were trotted out a few times a year to deliver budget news to the council—sometimes good, often somber, then promptly stuffed back into the dark pocket of the mayor, who, per Portland tradition, rules unchecked over all things fiscal and financial.

Things have changed now that the budget office is a bureau all unto its own. Though the mayor can still (technically) fire Scott whenever he wants, he now works (officially) at the behest of everyone on city council. That means he can say (mostly) what's on his mind.

If you're not convinced this year's budget matters more than most years, that's fine. Look! More meteor videos. If you want to learn a little something, then hit the jump.

MERCURY: What does your knew office mean for the Portland City Council and, more importantly, the city budget?

About 90 percent of the work will be the same as the old Financial Planning Division. But the office is no longer part of a large city bureau. The goal is to give us more indopeneince from the bureaucracy. The city budget office is also expected to serve all of council. That means the council will have the ability to directly ask questions, directly access information and request budget analyses for other bureaus. They've lays had that ability but the changes strengthen that.

We've also added some things. We already do a fiscal impact analysis on city council ordinances, but they've also asked us to do a business impact analysis. We're developing that.

Who wanted the business impact in the proposal?

It was something that the Portland Business Alliance and the Small Business Advisory Commission requested when [Fritz] did outreach.

Anything else?

Council also asked us to beef up our review of utility rates and regulations, having analysts team up with city economists and community experts, folks who do this for a living, outside experts.

Has the city ever faced this particular magnitude of budget crisis?

It's been a long time. After Measure 5 pased in the early 1990s and capped property taxes, the city city prepared for very large cuts, upward of $35 million and obviously on a smaller base budget. The actual impact wasn't nearly as large. Taxes decreased by $15 million. But on a smaller general fund, that might be equivalent. Same for Measure 50. The reductions didn't end up being quite as large as they thought.

I don't want to say it's unprecedented, but it's been a long time since the city faced a cut of this level. You can look at the budget guidance we sent out in 2009-10: 5 percent cuts. In 10-11, 4 percent and 2 percent. We had very small reductions in 11-12, 1.5 percent. And then, last year, up to 8 percent. On top of those numbers, we're now asking bureaus to cut 10 percent. It's coming off at least four years of budget cuts to bureaus.

We've heard about the new library district ($10 million) and the DOJ settlement ($5 million or so). What else is behind this deficit?

We've been able to create of a lot of one-time resources, and we've kept a lot of programs going using those one time resources. The forecast does not call for any one-time resources. The council also directed us to add the most important of those programs to our shortfall. That adds to our overall challenge. It also puts the city on a more fiscally sustainable path.

Will the library figure change?

We believe the impact is $10 million ongoing. Yes, that number could change. My understanding is the county believes it to be $7 million. That could change based on real market value growth, and where it happens. If it happens in outer East Portland, that will help. If it's in inner Northeast and Southeast, that's not going to help. It's hard enough to predict that on a citywide level. It's nearly impossible on a neighborhood scale. The county has more optimistic assumption than we do. It's still going to be a problem.

How much better or worse can the deficit get?

To the extent that the city's has conversations with the county, and they're able to pick up programs we'll need to reduce, that will help offset the deficit. Since it's a non-economic shortfall, and because our estimates for growth have been close to right on for the past couple of years, we don't see an major change in that. So it's hard to grow out of this. There's just as much a chance growth will fall a little bit.

Were cuts in previous budgets more illusory than they ought to have been. Can we get away with that again this year?

Council took real cuts in the last four years. But council also continued to find one-time money to pay for programs. What we're facing now is much deeper cuts than anything we've seen, combined with no one-time resources. No, the cuts we've taken haven't been illusory. But we've continued to piece together ways to continue a level of service we're not going to be able to continue any longer.

I don't think it would be fair to refer to those cuts as not real or somehow pretend. People lost jobs and programs were reduced. It's just a different magnitude this year. We've been cutting for four years. This is a different level of cuts.

Without those non-economic factors?

[Cuts] would be much more in line with past years.

Could Mayor Sam Adams have banked more of that one-time money?

They've banked some over the years. We balance our budget over five years, unlike any other government I'm aware of. If we see shortfalls in years 3, 4, and 5, that drives cuts in year 1. [Sometimes those cuts are deeper than needed] Which is what creates some one-time money. Sam set aside money—$4.9 million in the current year will be carried over. Last year, $9 million or $10 million carried forward. Legally, the council could have spent that money and balanced the immediate budget. But they would have left a bigger deficit.

What would it cost to save fire and police bureaus from the worst cuts—they're talking of laying off cops and closing stations.

To bridge our shortfall, if public sfatey is held to around 5 percent cuts, then all of the bureaus are at 10 or 11 percent—that is, if the deficit is solved only through program cuts. Public safety counts for two-thirds of the general fund. If they take a lower level of cuts, it drives everyone else up very quickly.

It's an inevitability with a deficit of this size that some reductions will come form police and fire. The question is what level and what's the impact on the other bureaus.

What are the odds of public safety layoffs?

Given past reductions to police and fire, it would be very difficult to make any substantial reductions that didn't involve positions. Both police and fire are holding positions vacant. It's an issue of how deeply council wants to go.

So what else can the council do if it doesn't want an all-cuts budget? Does it have to talk tough to the city unions?

There are four major pieces to balancing any budget. The first is program reductions, and that's what we've been talking about. The second is what I would call citywide efficiencies or cost reforms, ways to do business differently—like consolidating bureaus and sharing back-office functions. The low-hanging fruit has been picked over past four years but it's always worth looking at. The third is what I'd call citywide cost savings. This gets into labor savings. Personnel is one of the biggest general fund cost drivers. For the current year, council delayed cost of living increases for non-union employees. Council could look at that again in the future. Those are ways to generate sizable costs savings.

There's also new revenue. But those conversations are always politically difficult. That could range from a cell phone tax to smaller fee increases.

Last year, council cut $13.5 million from programs. It's hard to imagine we don't do at least that much and probably more. Making up the entire $25 million by cutting programs would lead to very deep cuts in a lot of bureaus, including public safety. Council needs to look at the other options.

What's the long term picture? Are we headed back here in another year or two?

If the council can solve the ongoing deficit this year, our forecast shows modest growth. If that holds, we should be on a fiscally sustainable path. The mayor has spoken. He's been pretty clear with my office about taking care of this problem now.