The City Council is set to approve the budget for the next fiscal year on Thursday, and it looks nothing like the tough one that was predicted just a few months ago.

Mayor Charlie Hales originally said the council would have to cut $21.5 million in general fund spending from the budget that takes effect on July 1, potentially slashing up to 170 jobs.

At the time, Hales warned that public safety agencies would not be protected from layoffs. His proposed budget eliminated the Portland Police Bureau's popular Mounted Horse Patrol and reduced Portland Fire & Rescue staffing levels by swapping a number of large engines for smaller vehicles. It also closed Buckman Pool and the Sellwood Community Center, and eliminated the city's share of funding for the mental health crisis center operated by Multnomah County.

But none of those cuts are in the budget the council will consider. In fact, it only cuts general fund spending by $16 million and potentially lays off up to 26 employees, none of whom work for the police bureau or Portland Fire & Rescue.

The discretionary part of the general fund for 2013-14 will be $397 million, down from the current $413 million, according to Andrew Scott, city budget director.

A number of factors helped Hales reduce the spending cuts. The economy has improved enough to increase city revenue projections slightly. The 2013 Oregon Legislature has approved a bill that will reduce future city contributions to the Public Employee Retirement System. The Friends of the Mounted Patrol has promised to raised $200,000 a year for the horse program. Multnomah County has agreed to pay the city's share of some joint programs.

At least some of the relief could be eliminated if the court rule the PERS reforms are illegal, however. State pubic employee union are expected to challenge them as a violation of the contract between the state and its retirees.

Some programs will still be cut, however. The Office of Healthy Rivers has been eliminated and its duties folded into the Bureau of Environmental Services. Funding will be reduced for programs serving the homeless and youth. And the fire bureau is expected to replace at least one ladder truck with smaller vehicles.

But the pattern is familiar to longtime City Hall observers. All mayors in recent memories have warned of serious cuts in upcoming budgets, only to somehow find the resources to prevent most of them.

In the meantime, city officials say the expect to collect $8.3 million in Art Tax funds this year. The $35 income tax was approved by voters at the November 2013 election. The funds will be distributed to school districts in Portland to hire art teachers and to arts organization to increase attendance.

The city had previously estimates the tax would collect $12 a year, but the first year would be less. The Oregon Tax Court dismissed a legal challenge by Lewis & Clark law professor Jack Bogdanski, who claims it is unconstitutional poll tax. The court said it does not have jurisdiction in the matter. A similar challenge is still pending in Multnomah County Circuit Court, which allowed the measure on the ballot after the same argument was used against it.

Steve Law contributed to this story.

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