The grim news about public finances just keeps coming. Yesterday, the Daily News reported that the city is projecting a $31 million deficit by the end of the fiscal year. Philadelphians have already suffered service cuts and tax increases this year; the shortfall means more will be coming.

What should taxpayers make of this development?

First, don't panic. It might sound like a lot of money, but $31 million is less than 1 percent of the $3.8 billion city budget. It's also not completely unexpected. The budget passed by City Council in March was based on projections of tax revenue. As we've found over and over, forecasts in the current economic climate are, shall we say, less than completely reliable. So it's worth noting that the deficit could easily increase over the coming months. It could also shrink, if tax revenue comes in better than expected.

Still, the issue needs to be dealt with. And there are already a number of things Mayor Nutter can't do. He can't raise taxes (again), for instance, because the city can only increase taxes before the start of the fiscal year. He also can't close libraries, recreation centers, or any other city facilities without approval from City Council. That's thanks to a lawsuit filed by Councilman Bill Green last year.

He does have several options, however. The mayor has almost complete control over the spending levels of city departments, and has already ordered them to cut their budgets by 7.5 percent. (That means some kind of reduction in services.) He can also increase fees for city services, like the co-pays for checkups at health centers. Finally, he could lay off city employees, or require them to take unpaid furloughs to help close the deficit.

Some of the more drastic measures probably won't come to pass. The deficit is a problem, but it's probably not big enough to justify a major fee increase. The hole also isn't big enough to require major reductions in services, like ending weekly trash collection or reducing police patrols. The city can probably find enough savings by eating around the edges of departmental spending.

That said, layoffs remain a possibility. The mayor's budget depends on getting $25 million in savings through concessions in new contracts with city workers. If things turn sour at the bargaining table, the mayor could raise the specter of layoffs to close the gap. The city can deal with a $31 deficit without major cuts, but $56 million is a much larger number.

Review city services on our sister site, City Howl.