This budget is an example of how to practice sound fiscal management during the ’08-’09 economic downturn. Explains how falling housing prices and the drop in consumer spending, caused by the recession, has created a budget shortfall of $2.98 million for the FY 2009-10 City budget. Details the declines in tax revenues: an $835,000 drop in property taxes, a possible 25% reduction in the CA State gas tax and Proposition 42 revenue, a 19% loss in the City’s general fund, and possible revenue shifts related to the California State budget. Outlines fiscal strategies such as budgeting fewer City positions, reviewing the Police Department’s budget to yield large savings, renegotiating contract services, implementing seven furlough days, and examining new ways to generate revenues. Utilizing community outreach efforts, such as focus groups and public opinion surveys, this budget includes residents in the budget making process, giving them a voice about city services and the priorities and values of the community.