IOWA CITY - Cities and counties are facing unprecedented challenges trying to balance their budgets.

Some say they haven't seen budget projections dip like this in more than two decades.

For weeks people have speculated about how the national financial crisis would affect us locally.

In Johnson County, the impact is substantial, leaving city and county officials questioning how to provide the same services with a lot less money.

Page after page Iowa City outlines ways to trim financial fat and come up with three and a half million dollars.

The shortfall is blamed on lagging investments and the housing market.

"When we started our making the budget we really didn't envision such a big hole in our revenues," said Michael Lombardo, city manager for Iowa City.

To fill in the budget gaps, city departments have been urged to cut back to save money.

Meanwhile the city is trying to earn more cash.

"So instead of raising taxes generally if there's a service in use and we can raise a fee that will help costs associated with that service we want to do it that way opposed to raising taxes," said Lombardo.

Some city proposals to raise more money include: increase rental housing inspection fees by nearly 20 percent, charging $20 more for monthly parking garage permits, and raising parking fines.

Then there is the issue of securing enough money for flood protection.

"It's going to take a couple of years to even get the financing in place so for projects like elevating Park Road Bridge and Dubuque Street you know we may not be able to start that for a few years," said Lombardo.

Also riding out the bumping budget process is Johnson County. For the first time since the 1980's, the county is projecting a loss in revenue.

If the shaky economy continues, more county cuts are likely.

"If it comes in even slower than we predict then we may have to look at things like less employees, less hours of service, of cut-backs on certain programs," said Rod Sullivan, Johnson County Supervisor.

Johnson County supervisors met this morning to review their budget.

Iowa City will start budget talks on Saturday, in a special work session.

Budgets must be adopted in two months.