Sacramento is facing a $35 million - $40 million budget gap next year, according to city officials who gave an update to the City Council Tuesday night.

The city must reduce expenses by 20 percent to close the gap for the 2011-2012 fiscal year, according to city staff.

Interim City Manager Gus Vina, who held a financial recovery workshop for the council recently, characterized the budget gap as “ugly and persistent.”

City Council members were in agreement about the desperate budget situation. They emphasized how hard it will be to cut more than they already have in the last several years.

“We’ve been squeezing and squeezing and squeezing,” said Councilman Kevin McCarty.

Mayor Kevin Johnson pointed out just how severe the cuts have been.

“(We’ve had) 191 million in cuts over the last four years,” Johnson said. “We have a serious commitment to be actively involved to solve this.”

Councilman Steve Cohn echoed Johnson’s sentiments, saying, “It cannot be business as usual for us, employees or the public.”

Leyne Millstein, director of finance for the city, said, “This is the most significant policy decision the council hears every year.”

Over the last five years, more than 900 positions have been eliminated, she added.

The rollover from last year’s budget shortfall, renegotiated labor contracts, public employee retirement system cost increases, new facility staffing costs and Proposition 218 corrections contribute to the projected budget gap Millstein reported.

Staffing for new facilities includes two libraries (Robbie Waters Pocket-Greenhaven Library and Valley Hi-North Laguna Library), Fire Station 43 in Natomas and a commitment to the Crocker Art Museum to staff the expansion.

Millstein presented guiding principles for the effort to balance the budget: maintain current core service levels while decreasing the cost of delivering services, avoid using one-time funds to pay for continuing expenses and rebuild the uncertainty reserve for emergency needs.

“We need to ask ourselves as a council how disciplined we’re going to be,” said Councilman Rob Fong. “We need to bind ourselves to these principles. It’s not going to get fixed in a year, and (it’s) not going to get fixed by building revenue.

“One thing we should also be thinking about is how we’re going to bring our services,” he added. “Given our revenue projections how would we run our city?”

“The economic cycle will come back. It’s going to take us a long time,” Councilman Jay Schenirer said. “We have a lot of education work to do, people are still in disbelief, they think there’s still 40 million in waste.”

The proposed budget is scheduled to be presented to the City Council by May 1.

According to Tuesday’s presentation, the city should be on track to a sustainable budget by the 2014/2015 fiscal year.