POST FALLS - Post Falls' city budget may have been recently approved, but a whole new budget-cutting horizon awaits as the recession continues its grip on the economy.

The city is discussing consolidation with the Post Falls Highway District, is considering contracting out more services and is reviewing programs to see if they make economic sense, said Eric Keck, city administrator.

"The budget for fiscal 2013 will indeed be the most difficult budget process that our community will have faced in quite some time," Keck said.

He said public input on its priorities will be crucial in the coming months. Forums are expected to be held early in the budget process.

"It is crucial for us to involve as many people from the public as possible since the future of municipal services will be discussed. I think if the public understands that services may face cutbacks and/or elimination, this will bring them to the meetings."

Terry Werner, the city's public works director, is also a board member at the highway district.

"We will soon be ratcheting up our efforts to explore this (consolidation) concept in greater detail," Keck said, adding that the agencies already cooperate on some maintenance projects.

Keck said there are several hurdles with merging, including a difference in salaries.

The city will analyze several programs and services on the chopping block. These include, but are not limited to, urban forestry, recreation programs, the vehicle lockout program through the police department and officer participation in special assignments and a regional drug task force.

Contracting out parks, street, engineering, human resource and information technology functions and maintenance will also be examined for cost and efficacy.

During Post Falls' recent budget talks, a local option sales tax was pitched as an alternative to raise funds instead of raising property taxes.

Idaho is highly dependent at the local level on property taxes for sustaining operations, Keck said. A sales tax can be allocated to certain functions such as public safety since commercial and retail firms that would be assessed the taxes have an impact on public safety.

"However, the challenge would be ensuring that entities would be disciplined enough to spend the sales tax wisely and not grow it too much in one area," Keck said. "Cities in surrounding states that grew their organizations disproportionately on sales tax found out the folly of such thinking when the economy crashed. Sales tax receipts evaporated and then wholesale layoffs had to occur."

A group of mayors is considering whether to place a local option sales tax proposal on the November 2012 ballot, but Post Falls Mayor Clay Larkin said he doesn't believe it will generate enough support to make it.

The Post Falls City Council recently agreed to increase property taxes 2 percent after taking no increase the previous two years. The additional funds will be spent on street maintenance, the vehicle/equipment replacement fund and employee merit pay, excluding department heads.

But city officials say, with revenues expected to continue to decline, cuts and cost-cutting measures will likely be necessary in the future.