Odds are San Juan County’s operating budget will be in balance by the end of the year.

But so is the promise of an even more painful round of cuts for 2010.

According to Auditor Milene Henley, the county, in terms of revenue, appears to be “a little worse than it was three months ago” based on second-quarter financial figures. The county, however, is roughly $884,000 lighter in expenses in the wake of a series of budget cuts authorized three weeks ago by the County Council.

Henley said several main sources of revenue of the general fund, namely sales tax receipts, appear to be holding steady and that a couple show signs of improvement, including a slight uptick in applications for building permits.

But others, like interest on investments and charges for goods and services, continue to lag far behind amounts anticipated when the 2009 budget was adopted in mid-December.

Henley said that she’s now “reasonably optimistic” that the general fund, which pays for the bulk of the county’s day-to-day expenses, including payroll, will be short about $1 million in revenue from the amount included in the budget late last year.

That’s better than the $2 million shortfall that the auditor earlier feared could result from the downturn in the local economy.

With an $884,000 spending reduction in place, Henley said the general fund is in position to be balanced by the end of the year.

The same can’t be said for 2010, according to Administrator Pete Rose.

Rose noted that while the county is limited by state law to an annual property tax increase of 1 percent, unless voters decide otherwise, the county’s overall expenses typically increase by an average of 4 percent a year.

Without any new sources of revenue to offset that rise in expenses, Rose said the general fund must be reduced an additional $400,000 to $600,000 by 2010, and that a cut of such magnitude would be painful.

“We are running out of areas to drop service levels,” he said. “For discretionary spending on local services we are probably down to Senior Services and [agricultural] Extension programs, including 4-H. As a whole, the core administrative and financial services, and the law and justice departments are probably already at or below the level of sustainability.”