Washtenaw County's $20.9 million structural deficit is now down to $17.5 million, according to a new financial forecast from County Administrator Verna McDaniel.

That's thanks to a less-than-expected drop in property tax revenues. McDaniel's report shows property tax revenues are going down by 2.77 percent this year — about 5.73 percent less than the county's projections from January.

Conan Smith, chairman of the Washtenaw County Board of Commissioners, said the $3.4 million swing in the county's favor is a small relief, but it's not a game changer.

"In terms of the budget crisis we're trying to resolve, that's $3 million we don't have to find or cut, but it doesn't solve the problem by any stretch of the imagination," he said. "There's still enormous amounts of work to do in terms of finding efficiencies and structural reforms and reducing the staff, so there's still a long, hard road ahead of us."

Smith hopes the revised forecast is a sign of more positive news to come, but he believes it'll be another five to 10 years before local governments fully recover from the economic downturn.

The latest forecast from the county shows general fund revenues of $93.72 million next year, going down to $90.22 million in 2013. Meanwhile, expenses — absent cuts — would total $103.25 million next year, increasing to $107.76 million in 2013.

Trimming more than $17.5 million over the next two years is the equivalent of 174 full-time positions in county government, which means many jobs remain on the chopping block.

Nearly two-thirds of the county's general fund budget goes toward salaries and benefits. About 45 percent is spent in the area of public safety, while another 17 percent is spent on justice.

When the county was facing a larger structural deficit, McDaniel originally laid out a plan to come up with $2 million in new revenues, $8.5 million in organizational changes and department reductions, $8.5 million in cuts to employee pay and benefits and $1 million in cuts in funding for outside agencies the county supports.

With the latest forecast, McDaniel is recommending the county not seek the $2 million in new revenues, that proposed cuts across the organization be lowered to $8 million, and proposed cuts to employee pay and benefits also be lowered to $8 million.

The county is asking its labor unions to come to the negotiating table in the coming weeks and months to make concessions to help minimize layoffs.

McDaniel and her staff will continue work on the budget in the coming months, with a presentation of the administrator's final recommendations later this fall. The county operates on calendar years, so the next fiscal year begins Jan. 1.

In the meantime, the county board will be asked in June to make a major structural reform by approving the merger of three departments: Community Development, Economic Development and Energy, Employment Training and Community Services.

Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's e-mail newsletters.