In the second of a series of meetings to deal with what the council has termed a “budget crisis,” the body on Wednesday afternoon debated several potential actions in preparation for budget cuts later this month, including: analyzing the proper level of police protection; merging internal departments at City Hall; and reducing community service contracts.

The issues discussed all fit under an opening statement made at each of the two meetings.

“Everything is on the table,” said Mayor Bob Scales.

The plan for the latest meeting was to form a list of priorities as to what is most needing of city funding. With the majority of department heads on vacation this week, however, it wasn’t possible for the council to receive feedback about the needs of individual departments.

At the next meeting, scheduled for 6 p.m. on Feb. 22, interim City Manager Lee Walton will return with a suggestion of potential budget cuts, which must total $2 million over two years. The council will also have the opportunity to talk to department heads about the signifcance of potential changes.

Following that meeting, a list of budget cuts will come before the council at its first meeting in March.

Individual councilors had different ideas on which aspects of the budget could be cut.

Last week, Bill Knobloch brought up the idea of merging the information technology departments at the city’s five taxing districts, which would help cut some expenses from a department that costs more than $550,000 in the city budget.

Barry Peters advocated exploring the community services contracts, worth a total of $1.2 million. He said voluntary cost reductions from the agencies are a possibility. Some of the options he presented included reducing 2 percent going to the arts back to 1 percent, and looking for organizations that would allow a voluntary funding decrease.

Scales asked Walton to look at what the impacts would be at various levels if some management positions were cut, while other vacant ones weren’t re-staffed. Specifically, he asked about looking at the impact of cutting one lieutenant from the police department, and possibly a secondary manager or two similar in scope to the deputy planning director.

In the midst of all these possibilities of cuts, some councilors were made uncomfortable by the fact that it remains unclear exactly how much spending money the city has.

“Until we know how much discretionary money we have,” saidKirsten Hytopoulos, “I don’t know how we can make a rational choice on how to fund those services.”

She said not having the number and a true idea of what the city can fund creates problems for the council in how to explain to departments and organizations why they won’t get their money.

The council discussed many of these same issues during budget revision talks last year, but in several instances decided to retain or increase funding for projects or organizations that they are now contemplating reducing.

Last week at the first meeting, the council decided it needed to create several reserve funds to avoid a situation like the council’s execution of an interfund loan in January.

The council decided on a $3 million set of reserves. Of that money, $1.5 million would go to capital reserves, available to pay bills at City Hall.

Another $500,000 would go toward a contingency fund for unexpected expenses, which would be accessible only with council permission.

The final $1 million would be for an emergency reserve fund, money that will largely remain untouched.

Those reserves will be collected over a two-year span.

In 2010, the council decided it will place $1 million in the capital reserve fund.

The following year it will deposit $500,000 into the capital reserve account and $500,000 in the contingency fund.

The council agreed that since the emergency fund most likely won’t be used often, it could be funded by one-time revenue, such as the sale of surplus property expected to happen this year.