The city of Atlanta expects to fall short $120 million when it approves its next budget in June, which likely means 25 percent cuts for most city departments.

Mayor Shirley Franklin outlined the grim details in a letter and presentation sent to City Council members earlier this week.

Atlanta has a 12-month budget cycle that begins July 1 and ends June 30. For the budget cycle ending June 30, city officials project they'll collect $611 million in revenues. For the budget cycle from July 1 to June 30, 2009, the city expects to collect $492 million.

City officials say they're collecting less money from sales tax, property taxes and other fees. Since 2003, Atlanta has had an annual average increase of 1-percent in revenues, when adjusted for inflation.

Meanwhile, the city is spending more on health insurance and pensions.

The city predicts it will spend $28.8 million more on pensions this year. Health insurance expects to rise by nearly $1 million, according to Franklin's presentation. Pensions and health care represent about one-quarter of the city's budget, city officials say.

"From an operational standpoint, the fundamental change in our personnel cost structure...means that going forward we will have to focus on core services and become more efficient in delivering those services," the mayor wrote.

The mayor announced in January that Atlanta is facing a projected $65 million deficit in its current budget cycle. City officials blamed the shortfall on rising costs, the struggling economy and a host of budgeting errors. Officials said they plan to close the gap by hiring only essential employees, cutting some spending and reaching into its reserves.

The mayor told reporters last month the budget for the next cycle could be significantly less than the current $645 million budget.

Franklin's package to the council offers few details on how the city will cut spending. The police, fire rescue, corrections and other public safety departments are exempt from the cuts.

In 2002, Franklin dealt with an $82 million deficit she inherited from Mayor Bill Campbell by raising property taxes for city operations by 51 percent, giving no raises and eliminating more than 900 vacant and filled positions.

Councilwoman Mary Norwood said Thursday she hopes the city can cut spending by analyzing employee job functions and having them work more efficiently rather than through massive layoffs or a property tax increase.

One plan mentioned by Franklin's staff to cut costs is to remove solid waste services ? which includes garbage collection ? from the city's general budget. The idea is to make the service a self-sufficient enterprise fund, like the Watershed Management department and its Aviation department, which includes Hartsfield-Jackson International Airport.

The city spends about $3 million a year than it collects in fees to keep solid waste services running, said Councilman Howard Shook, chair of the council's finance committee.

"The city has never charged what it costs to provide the service," Shook said in an interview Thursday.