IT'S A TIME of fiscal unease in Portland City Hall.

City council may have passed a landmark $500 million general fund budget earlier this month, but it hasn't kept our elected officials from their disagreements.

One biggie: Mayor Charlie Hales wants desperately to increase police pay, and has been trying to impress on city commissioners that a deal he's trying to strike with the city's main police union is a rare opportunity to solve a worsening officer shortage.

The problem is, Hales can't say where the millions would come from to pay for that deal. And while he assured me the city could tighten its belt in other ways to pay for cops if need be, his colleagues don't appear to be buying it.

"You can't just announce that there's a problem and it'll cost a certain amount to fix it, and the money will materialize," Commissioner Steve Novick said recently, reflecting on his own long effort to win new money to pay for roads.

That same sentiment could make an unrelated item that's coming up before the council this week pretty interesting.

The City of Portland is on the cusp of lumping many of its resources for fighting homelessness in with Multnomah County's. Under an agreement the council will vote on June 22, the Portland Housing Bureau will send four staffers, its contracts for social services, and at minimum $15 million a year across the river, to help run a "joint office" on homelessness overseen by County Chair Deborah Kafoury. The county will also chip in $15 million, meaning an investment of at least $30 million toward the city's homelessness crisis for each of the next five years.

That's big money, and officials say a single office will be able to use it more efficiently.

Here's where it gets tricky, though. As it's currently structured, the agreement would create exactly the kind of unfunded mandate Novick and his colleagues have been so reticent about of late.

Of the minimum $15 million per year the city's committing itself to contribute over the five years of the new agreement, Portland's only carved out $11.5 million in ongoing funds in the latest budget.

There's plenty more where that came from—the city's kicking in more than $25.3 million to the new homelessness office this year. But most of that is one-time cash, not built into future budgets. That means the city's on the verge of approving a deal that creates a nearly $3.5 million deficit for next year.

And you know, it's very hard to envision the city rejecting that agreement. Officials are under the gun to get a deal in place before July, the start of the next fiscal year.

So the question becomes: How will the city pay for the new homelessness effort going forward? If revenues continue to rise, they may dig the city out of its hole. If not, out come the budget knives.

"I'll certainly be interested," Novick tells me, "in hearing ideas about how to pay for those additional ongoing costs."