SAN DIEGO -- The City Council convened a special meeting Wednesday to begin discussing how to close a projected spending shortfall in San Diego next fiscal year that Mayor Jerry Sanders has estimated at $179 million.

"Like other cities across the nation, San Diego is facing a large deficit next year," Sanders said at the start of the hearing. "The extent of our budget problems for fiscal year 2011 is a direct consequence of falling tax revenues and rising pension payments due to investment loses on Wall Street, both brought on by the recession."

Mary Lewis, the city's chief financial officer, told the council that if the city relied solely on cuts to balance the budget, it would be equivalent to slashing 20-25 percent across the board.

This fiscal year, the city overcame an $83 million spending shortfall without having to significantly impact services such as parks, libraries and recreation centers. But with a deficit approaching $200 million, Sanders said it's unlikely residents will be spared the pain in the coming fiscal year.

"A deficit like the one we are facing is so significant we can no longer prevent impacting the public," Sanders said.

"As we begin addressing this gap, we will examine every possible alternative to cutting services," he said. "But, in my estimation, there will be cuts and the public will feel them."

The City Council's Independent Budget Analyst Andrea Tevlin has disputed the mayor's revenue predictions and said the budget shortfall in fiscal year 2011 will be more like $201 million.

She told the council Wednesday there are "few viable solutions that can get at the magnitude of the problem or can be accomplished by fiscal year 2011, short of service reductions, program and personnel reductions."

In a 35-page report delivered to the City Council late last week, Tevlin suggested partial solutions to the budget problem including altering the way savings from vacant positions are factored, delaying any increases to the city's reserves, implementing a voter-approved outsourcing program and further pension reforms.

Tevlin has also recommended that the City Council consider putting a fee for garbage and storm water collection on the ballot. However, she has acknowledged that any revenue increase that requires voter approval wouldn't take effect in time to help balance the fiscal year 2011 budget.

Councilman Carl DeMaio chided the mayor's numbers for being "perhaps overly optimistic" and blamed the budget deficit on the city's future retiree obligations.

"My friends, there is no tax increase big enough, there are no service cuts to our neighborhoods that will be deep enough that will solve our city's financial problems," DeMaio said. "We must deal with the liabilities in pension and retiree health care that are driving our city's financial problems."

Councilman Kevin Faulconer called for the implementation of the city's managed competition program, which was approved by voters three years ago to permit the outsourcing of certain municipal services.

"We have to move forward on that," Faulconer said. "There are other things we are going to have to be doing -- it is not the sole solution -- but it has to be, in my opinion, an important part of the solution."

Sanders has pledged that his office is "not taking anything off the table" when it comes to potential ways to balance the budget for the coming fiscal year, which begins July 1.

His office has until April 15 to present the City Council with a balanced budget for fiscal year 2011.