The city of Craig’s 2014 budget is going to be a tight one.

Craig City Council took a look at the proposed budget at their Tuesday meeting but won’t vote on it until the second reading Nov. 19.

In 2012, the city of Craig ran into a deficit of $2.9 million. This year the proposed projected budget predicts a deficit of $2.2 million.

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City Manager Jim Ferree said this can be paid off with fund balance and reserve, but it still puts the city in a predicament.

City Councilman Don Jones said council will conduct a workshop on the budget to iron out details Oct. 29.

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“We’ll see if we can be frugal but still as efficient as possible,” he said.

The problem isn’t necessarily how much money they’re bringing in, Ferree said.

“Our revenue has been fairly consistent. We’ve been fortunate — even through the recession,” Ferree said.

Still it will be hard to bring in more money at this point, he said.

“There’s not much we can do on the revenue side,” Ferree said. That would require a hike in taxes, which needs a vote from the people to be approved.

The cause of the problem largely is because of rising health care costs for city employees and a static revenue base, Ferree said.

“Health care costs would be the biggest thing,” Jones said. “When your revenue stays pretty flat — (it) doesn’t rise as much as other things — you have to do different things to save money.”

Ferree said sales tax consistently has brought in good revenue, but it hasn’t increased substantially to compensate for unpredictable insurance claims.

“The major reason is we’ve been very lucky in the past with our insurance claims” until now, he said. “We have had an increased number of insurance claims.”

That’s why the city will be changing up its insurance plan, Ferree said. They will be moving from a self-insured model to a larger pool. That means $300,000 in savings for the city, but a higher cost of insurance for city employees.

“The out-of-pocket cost to the employees will be higher,” he said.

But, savings in health care won’t pull Craig out of the red. So Ferree and city councilmen will discuss other cuts at their upcoming Tuesday workshop.

From hiring freezes to furloughs; everything is on the table, Ferree said.

“We cut some seasonal positions, and we cut some overtime,” he said.

Ultimately, they want to work out the budget so everything can be business as usual without running into a deep deficit.

We aim to “preserve the basic infrastructure, maintenance and improvements,” Ferree said.

Jones said he is confident they will be able to develop a workable budget.

“I think it will be fine,” he said. “We’ll work it out.”

Erin Fenner can be reached at 970-875-1794 or efenner@craigdailypress.com.