City Council members yesterday said they were using a "paring knife," not an axe, to carve about $9.5 million from the city's $1.82 billion operating budget for the next fiscal year, but warned more drastic cuts would likely be needed.

The council's Budget Committee proposed a 1.5 percent across-the-board spending reduction for city departments, with exceptions for essential services, and reduced funding for vacant positions. The panel also slashed about $2 million for supplies and other operating costs for fiscal year 2011, which starts July 1.

Budget Committee chairman Nestor Garcia decided to defer several controversial proposals aimed at saving tens of millions of dollars, including elimination of the Royal Hawaiian Band and big cuts to Summer Fun, the hugely popular summer program for schoolchildren at city parks.

He said that although those programs are safe for now, they could still see major funding cuts in the future. The budget chairman also urged residents to start speaking out to let the council know what to save.

"We need to really pinch our pennies here," Garcia said.

During the committee hearing yesterday, Garcia said it was too soon to start seriously considering "draconian" cuts.

"In this first pass, I want to be careful how we apply the knife," he said. "We're taking a paring knife instead of an axe."

The budget is under consideration as the council faces several fiscal unknowns.

Members haven't yet decided whether to accept a new property tax rate proposed by Mayor Mufi Hannemann for the "nonhomeowner" category comprising residential properties with absentee owners.

If the new rate is rejected, the council would have to find about $18 million somewhere else, Garcia said.

Also under consideration is a proposed 3-cent-per-gallon increase in the gasoline tax.

The city is still waiting to see if the Legislature is going to take away the counties' portion of transient accommodations tax revenues. If that happens, Garcia said, the council will have to make an additional $20 million or more in spending cuts.

"This is the gravity of the situation," he said.

Several city department heads told the committee yesterday that they already are operating on lean budgets, and a 1.5 percent reduction in spending would likely translate into layoffs or program cuts.

Gordon Bruce, director of the Department of Information Technology, told members the proposed cuts would "result in warm body" reductions and would force the city to hold off on a project to replace a decade-old e-mail system.

The draft budget will next be discussed in a public hearing April 21.

The council is expected to bring the budget to a full vote in mid-June.