Continuous cuts to revenue sharing represents the most significant loss for local government, as the Legislature has scrounged every scrap it can to balance the state budget.

Council member Roger Peters said the state has not lived up to its agreement with local governments regarding revenue sharing. In exchange for letting the state levy and collect sales, gas and weight taxes, cities were supposed to receive a refund from the state. Peters said the state has fallen short of meeting this requirement because of legislative cuts to revenue sharing, which he said has led to nearly $11 million in unfulfilled revenue sharing pledges for East Lansing in the past decade.

“We always thought there was a compact between the local units of government and the state that some of that money would be returned,” Peters said.

East Lansing Mayor Vic Loomis said the deficit likely will be solved by a combination of two or three factors: a property tax increase, tapping into the city’s nearly $3.2 million rainy-day fund and reducing city expenditures.

“I want to underscore if we do vote to put that tax increase through that it would be done in conjunction with two other fairly significant occurrences,” Loomis said.

Loomis said the city is prepared to use between $700,000 and $800,000 — or 21.8 percent to 25 percent — of its reserves.

Adding to expenses, the city must contribute 20 percent more into its pension fund to accommodate its depleted value, which will hit the city for $580,000.

The city could take other cost-saving measures, such as consolidating various positions, as the city continues to leave vacant posts open. Also, it will likely impose furlough days for city officials.

Councilmember Nathan Triplett said many of the methods discussed Saturday and cost savings from the current fiscal year would help erase $2.1 million of the $5 million deficit.

“I’m quite serious when I say literally everything is on the table,” he said. “With a deficit of this size we can’t afford not to think about everything.”

East Lansing City Manager Ted Staton said $2 million was saved this year from not replacing police officers, delaying computer and vehicle upgrades, furlough days, postponing sidewalk maintenance and other measures.

The city will engage in talks with the community during the coming months as it prepares its budget for the coming fiscal year by the end of May. Staton will make a presentation similar to Saturday’s before every commission and city staff will address neighborhood boards and other entities, resulting in about 40 to 50 meetings. The city also launched www.cityofeastlansing.com/fiscalchallenges, a new Web site devoted to budget issues.