Mayor Jerry Sanders today released his proposed $3 billion budget for San Diego for the coming fiscal year that preserves most municipal services but relies on sizable reductions in employee compensation and boosting a range of city fees.

Declining revenues amid the ongoing economic slump has left San Diego with a spending shortfall of $60 million, Sanders said.

Rather than laying off more city workers, Sanders recommended balancing the fiscal year 2010 budget largely by forcing the city's roughly 10,500 workers to accept a 6 percent across-the-board cut to pay and benefits.

He already has declared an impasse with the city's five labor unions, who have indicated they are willing to accept some concessions but argue that the cuts proposed by Sanders go too far.

An impasse hearing before the City Council is scheduled for Tuesday.

Leaders of the city's two largest unions -- AFSCME Local 127 and the San Diego Municipal Association -- were not immediately available for comment.

"In San Diego we have a choice," Sanders said at an afternoon news conference. "We can ask all employees to reduce compensation by roughly 6 percent, or we can achieve the same amount of savings by laying off hundreds of employees and cutting the services they provide."

"To me, the choice is clear," he said. "This is the year to protect city services and the employees that provide them."

Over the past four years, San Diego has trimmed its workforce by 11 percent, or 875 positions, resulting in fewer library and recreation center hours and cuts at municipal parks.

"Further reductions are in nobody's interest," Sanders said. "We want to protect our quality of life not degrade it."

To balance the budget, Sanders' spending proposal also relies on $6.7 million in new city fees, tapping a hotel-tax funded reserve account for $17.8 million, $4.3 million in already approved franchise fee hikes and $3.7 million from a library systems improvement fund.

The proposed spending plan for the fiscal year that begins on July 1 includes about $1.15 billion for the city's general fund, down from $1.19 billion in the current fiscal year.

The general fund pays for most municipal services, such as administrative, parks, libraries, police and fire.

The proposed fiscal year 2010 budget preserves those city services at current levels, Sanders said.

"In order to maintain these service levels and balance our budget, we need employee wage concessions," Sanders said. "Make no mistake, it's one or the other. Cut services or cut wages. There is no other responsible choice."

Spending in fiscal year 2010 proposed for the San Diego Police Department is $427.2 million, compared to $424.5 million this year. The San Diego Fire-Rescue Department is slated to get $209.5 million, compared to $199.5 in the current fiscal year.

The Park and Recreation Department's proposed budget will drop by $5.2 million to $116.4 million. Libraries are slated to get $38.7 million in fiscal year 2010, compared to $37 million this year.

Sanders is scheduled to deliver his proposed spending plan to the City Council during its meeting Tuesday. The council has until June 30 to adopt the fiscal year 2010 budget.