Facing an early budget hole exacerbated by slow and low tax revenue, members of Butler City Council discussed the city’s precarious financial situation this week, saying cost overruns from last year have resulted in the need to take out a substantial internal loan.

City Clerk Mindy Gall said the financial swing comprises hundreds of thousands of dollars.

Butler ended 2014 with $445,000 in its general fund, Gall said. It ended 2015 having overspent that general fund by $28,222, with Gall saying an extra pay period — 27 instead of the normal 26 in a year — was the “main culprit” behind the deficit.

Whatever the cause, the depleted fund reserve has created a ripple effect financially. Normally a $750,000 tax anticipation note (TAN) — a short term, low-interest loan — and the city’s fund reserve allows the city to get through the start of the calendar year when tax revenues are slim.

But this year, the TAN already has been spent, and without a carry-over in reserve, Gall said the city on Wednesday withdrew $200,000 from the parking fund — which was formerly overseen by the now-disolved Butler Parking Authority — to cover payroll and other expenses.

Gall said the fund, which had a little more than $370,000 this week, isn’t governed by rules that require the city to pay back the money by a set date, but she anticipates the internal loan will be returned by sometime in April, when the city’s tax revenues pick up.

Councilman Michael Walter, director of accounts and finance, on Tuesday called attention to the budget issues. Walter said he was concerned that the continued financial strain raises the prospect of Butler entering the state’s program for financially distressed municipalities, known as Act 47. He said that for the first time in recent memory the city had begun its calender year with a deficit.

“The fiscal cliff is right here,” Walter said Tuesday.

Council members all say they want the city to search for savings wherever they can be found.

At its meeting Thursday, council voted down two motions to buy vehicles — two police vehicles and a truck for the streets department — saying that officials had found more cost-effective deals that include used vehicles. The savings from those deals, which council voted Thursday to rebid, exceed $100,000 from what officials had budgeted for the buying of new vehicles.

Councilman Kathy Kline said she wanted the city to adopt a frugal attitude on spending, although she acknowledged that approach won’t work when it comes to many capital improvement and public maintenance projects.

“There’s absolutely no leeway,” Kline said. “I’m to the point where, if someone asks for a new telephone, I say, ‘I’m sorry, it (the money) is not there.’”

But capital purchases and projects aren’t the city’s major cost drivers, officials said. Councilman Richard Schontz Jr. and Mayor Tom Donaldson both said that the single biggest expense is its union contracts — though Donaldson defended employee wages, calling them reasonable.

“It’s not the wages because the wages aren’t out of line,” he said. “Most of our people could make more money doing the same job somewhere else.”

Donaldson said contract arbitrations and the way the Third Class City code is written to have limited officials’ ability to negotiate contracts, and the city’s high number of tax-exempt properties is another contributing factor.

“Many of the things that need to be done to fix this are hampered because of contracts and arbitrators who consistently rule against the city,” he said.

On Tuesday, Walter pointed to budget overruns in the city’s police and fire departments as emblematic of his concerns about spending. He said the fire department was more than $98,000 over budget last year, and the police department overspent its budget by more than $47,000.

Walter said he wasn’t singling out the public safety departments for criticism, and that cost overruns were widespread.

“A lot of departments are this way,” Walter said. “We’re spending money we don’t have.”

On Thursday, Walter said he wanted to familiarize himself with the city’s finances before proposing any actions, but added he intends to create projections to determine where the city might be financially at this time next year.

“There are savings to be had, it’s just finding them — and doing so without cutting services,” Walter said. “We don’t want to cut services.”

Schontz said he wants to consider setting broad savings goals for departments.

“I think we need to challenge possibly everybody with their departments to try and cut 10 percent,” Schontz said. “I think if we do that, we’ll be OK at the end of the year.”

Councilman Corey Roche said he wants to focus on making the city more attractive to new residents in addition to looking at ways to cut spending.

“The main thing we need to do is try to grow the tax base,” Roche said. “We need to find a way to increase our revenues.”