HILO, Hawai'i — Government spending would be slashed if Mayor Billy Kenoi's proposed operating budget for next fiscal year is approved.

The proposed $386.3 million budget released Friday is $16.9 million less than the budget for this fiscal year. However, because the county's full deficit exceeds $31 million, the administration had to identify other areas within department budgets to cut, as well as move some revenues to the general fund.

However, Kenoi's preliminary budget for the fiscal year, which runs from July 1 through June 30, 2010, doesn't raise property tax rates or cut any employees, but does propose to cut funding for 42 vacant positions.

To balance the budget, "we will be requesting that the council approve a transfer of $2 million from the budget stabilization fund to the general fund," Kenoi wrote in his message attached to the budget.

Finance Director Nancy Crawford said Friday the budget stabilization fund, also known as "the rainy day fund," presently has just over $2 million in it.

Kenoi wrote that the county's fund balance carryover will decrease by about $10 million because of revenue shortfalls, and "is expected to be much lower than last year."

Crawford said cuts to county services will be minimal. Departments were asked to cut 10 percent from their budgets, but the reductions should have little effect on services, she said.

Crawford said the Environmental Waste Department's Solid Waste Division "may have to make some alterations to some services to make their budget work," but that overall the sting to residents should be small.

Many departments chose to cut overtime funding, but no employees will be asked to participate in furloughs to help keep costs down, Crawford said.

She added that residents will get a better idea of what these cuts will mean to them when department heads discuss their individual budgets with the County Council during upcoming meetings. The budget needs to be passed by the council and signed by the mayor before the end of this fiscal year.

Kenoi also proposes to dip into the voter-approved land use fund that sets aside 2 percent of property tax revenues to purchase properties residents believe should be preserved and protected from development. The amount targeted in land use funds represents about $4.5 million for next fiscal year, he wrote.

Kenoi's administration will also seek council permission to sell roughly 3,400 acres of land the county obtained in lieu of taxes from Hamakua Sugar Co. in 1995. This proposal "came only after making significant cuts throughout the county departments, unfunding many vacant positions and deferring transfers to reserve and provision accounts," Kenoi wrote.

"Because the property was given to the county in settlement of real property tax debts, it is appropriate that it provide a source of revenue to the county in these difficult times," he wrote.

Property tax revenues, according to the budget, are expected to drop by 5.6 percent, or $12.3 million, because of decreasing property assessments, and fuel tax revenues are expected to decrease by 9.6 percent, or about $800,000.

Interest revenues are expected to decrease by $4 million because of low yield investments, and "the increases in a number of grants (that) are more than offset by the decreases in housing voucher assistance and Transient Accommodation Taxes, resulting in a net decrease of $1.6 million," according to Kenoi.

Revenues the county collects in service charges are expected to rise by $970,000, "with increases in automotive charges exceeding the decrease in construction permit revenue," he wrote.

Some of the expenditure changes include elimination of funding for the county's coqui frog eradication program, cutting the Office of Election's budget and cutting $900,000 from the council's contingency relief account.