Illustration by Nick Patton

IT WAS ONLY this spring that Portland City Council was cheering its good budget fortunes for the first time in years, with Mayor Sam Adams looking to ladle out millions in surplus cash for his and his fellow commissioners' favorite programs.

The good times appear to be over.

According to a somber memo first revealed on the Portland Mercury's Blogtown, all city bureaus that siphon from Portland's general fund have been asked to draw up plans for painful budget cuts next year, as deep as eight percent. Worse, bureaus have been told to not even think about asking for new programs that require new funding—unless, that is, they come up with cuts to pay for it first. Exceptions will be made for current programs funded every year with "one-time" money.

It's a return to the semi-painful, if prudent, budgeting style of Adams' first two years. But now the list of cuts could include sacred cows: fire stations, police officers, mental health programs, parks hours, and housing inspectors.

"I have taken a dour assumption about revenues," Adams said. "I don't want to take a chance and have to make cuts in the middle of next year's budget."

The worst-case scenario Adams fears would mark a stunning turnaround from a cautiously optimistic five-year forecast issued earlier this year. So what went wrong?

For one thing, global chaos continues to slow the national—and local—economy. State and federal cuts will choke off funding for vital programs. Property tax and business license tax revenues will remain soft. Inflation could bump up employee salaries. Also, a possible library district measure on the county ballot next year could cut $5 million to $6 million from the city's general fund.

Adams, meanwhile, says he won't touch the city's $47 million reserve fund. And the fire and police bureaus—the general fund's biggest takers—won't have to pare back as deeply, Adams says. Some $9 million was socked away for a rainy day fund last year—but only $5 million of that will help the 2012-2013 budget.

There's also the chance that, once more updated figures come in this fall and winter, things will improve. That's why bureaus also will consider four percent and six percent cutback scenarios.

"I wouldn't consider any of it an overreaction," says City Commissioner Dan Saltzman. "But I've never found the actual cuts to be as dire as the initial projections. But, then, we've never been in this dire of an economy either."

A previous version of this story incorrectly said a library levy on the county ballot would affect Portland's finances.