WAILUKU - While her administration's fiscal 2010 budget calls for no real property tax increases, county employee layoffs or furloughs, Mayor Charmaine Tavares warned Monday that the county is far from secure.

We don't know yet what the state is going to do with the transient accommodation tax," Tavares told County Council Budget and Finance Committee members Monday as they began their review of the fiscal 2010 budget. "If they take all or part of that transient accommodation tax, which is represented by $18 million in this year's budget, that means we all have a hard road ahead of us to find $18 million or to do more cuts to get us to $18 million less than we have today."

She said administration and council members cannot afford to be complacent.

"This challenge is not over by a long shot," she said. "We cannot be resting and saying, 'Oh well, we got it. We made it. We have a great budget. Everything's fine.' It's not fine. We know everyone is having to share the pain."

The state has control over the distribution of money raised from visitors in the transient accommodations tax, or the so-called hotel room tax, a portion of which traditionally has gone to the counties. In fiscal 2008, Maui County received $23.4 million. This year, it has budgeted to get nearly $22 million, and for fiscal 2010, the Tavares administration is planning to receive $18 million, or about 18 percent less than this year.

But as lawmakers attempt to balance the state's recession-battered budget, they are considering a bill to suspend sharing hotel room tax money with the counties for six years. The bill has passed the House and is pending in the Senate.

Gov. Linda Lingle's spokesman, Russell Pang, said Monday that the governor has not - so far - proposed taking the transient accommodations tax from the counties. But he said he didn't know what the governor would propose on Wednesday when she will unveil her latest proposal to cope with state budget shortfalls.

Central Maui state Rep. Gil Keith-Agaran, a member of the House Finance Committee, said he voted in favor, with reservations, of House Bill 1744 to withhold transient accommodations revenues from the counties.

But he said his vote was a strategic move to allow him to participate later in debate during conference committee decision-making.

"Most of us voted with reservations, which makes sure we can discuss it," Keith-Agaran said. But "I don't think anyone is looking to pass along the deficit problem to the counties."

Central Maui Sen. Shan Tsutsui, vice chairman of the Senate Ways and Means Committee, said he was opposed to the measure.

"I don't support any initiative that would take the TAT away from the counties," he said. "It would be devastating for the counties for us to take the money away and basically force them to raise property taxes and look for some other means to balance the budget."

Tsutsui said the measure hadn't been scheduled as of Monday for a hearing before the Senate money committee.

But by passing the measure, the House appears to be sending the message that it believes the Senate should consider taking away transient accommodations money from the counties.

"It shouldn't even be an item for discussion. But unfortunately it is," he said.

The Tavares budget forecasts county revenue of $572 million in fiscal 2010, a $12 million, or 2 percent, increase over the current year's budgeted revenue of $560 million.

The mayor said county departments began tightening their budget belts in August of 2008, just two months into the fiscal 2009 budget, which started July 1 last year and ends June 30 this year.

"We knew early on that we were heading for hard times," she said. "We were able to refocus and reprioritize and leave some things out for later that they could do without for now."

Tavares said county department heads worked to build up savings to prepare for what everyone believed would be a tough fiscal 2010.

"If we hadn't done that last August, we'd be in a deeper hole than we thought we were going to be in," she said. "We had a challenge to balance what we thought were going to be greatly reduced revenues, with increasing expenses and trying to build a savings at the same time to carry over from 2009 to 2010."

Following Tavares' opening statement, Council Member Mike Molina asked the mayor what she would suggest cutting if the county were to lose the $18 million in hotel room tax funding.

Tavares said she would first look at state programs that have been funded by the county during flush economic times.

"You know, when push comes to shove, we need to take care of our county jurisdictional programs first," she said.

Tavares said she recognizes the importance of programs such as watershed protection, miconia and invasive species control and Maui Community College courses for nursing and dental students.

The mayor said "all of these kinds of things . . . are really state functions."

"So I think we have to take a hard look at those kinds of programs for sure," she said.

Tavares told council members that county departments increased their efforts in seeking and applying for grant awards. For fiscal 2010, the county expects to receive $163 million in grants, or 87 percent more than the $87 million in grants anticipated this year.

About $30 million in grants is expected to come from the federal economic stimulus package known as the American Recovery and Reinvestment Act, the mayor said.

Among federal stimulus projects are the completion of Market Street improvements into Happy Valley in Wailuku and a bridge replacement in Hana, she said.

She asked council members for their continued cooperation in pushing through federal money received for county projects.

"We know we can count on you to push through this process efficiently so that we can assure employment of our residents to the largest extent possible," Tavares said.

Council members must take action on their version of the 2010 budget before the end of May. The new budget goes into effect July 1.

* Brian Perry can be reached at citydesk@mauinews.com. Staff Writer Melissa Tanji contributed to this report.