Mayor Bloomberg is plunging his knife back into the budget and ordering all city agencies to slash spending by another 7 percent for next year, a month after he already proposed unpopular cuts and tax hikes amid a grim economic slowdown.

In a letter sent late Tuesday and provided to The Associated Press, Bloomberg’s budget director Mark Page warned agency heads that tax collections in November were even lower than forecast, “continuing an alarming trend” amid a nationwide recession.

“The outlook for the U.S. and city economies has deteriorated,” Page wrote.

Agency heads are required to submit spending reductions to the mayor’s budget office by Dec. 22. The plans must identify specific cuts to reach a 7 percent reduction, or $1.4 billion citywide, in fiscal year 2010, which begins in July.

The belt-tightening order comes after the mayor already ordered a 2.5 percent reduction this fiscal year and 5 percent in 2010.

“We are going to have an enormous problem,” Bloomberg told reporters Tuesday. “Even with all of the cuts that we have proposed, even with all of the revenue increases that we’ve proposed, we probably have a few billion dollars deficit.”

A gap of $1.3 billion is still forecast for fiscal 2010, Page noted in his letter. Multibillion-dollar deficits loom in the next few years.

Bloomberg, an independent who is running for re-election next year, already is in the midst of contentious negotiations with the City Council over his last round of cuts announced in November.

He presented a budget update that proposed cutting hundreds of jobs, canceling the next class of police cadets, raising various fees and fines, closing health clinics and reducing nighttime staffing at some firehouses. He also is seeking to eliminate two pieces of property tax relief, including a program that sends $400 rebate checks to homeowners.

The rebate program, if revoked, would put $256 million back into the budget. It remains a sticking point in the negotiations with the City Council and is the subject of a pending lawsuit.

Council members, including Speaker Christine Quinn, have come up with their own proposals. A bill to raise the city’s hotel tax — a move Bloomberg has opposed — was introduced on Tuesday. The tax would go up by 0.875 percent, generating an estimated $80 million by the end of fiscal 2010.

For a room rate of $300, the increase would amount to $2.62 per night.

Bloomberg also has said he is not ruling out raising income taxes. Those could go up by as much as 15 percent, meaning an annual increase of $233 for a resident earning between $50,000 and $70,000 a year.

(Source: WNBC NY)