SPARKS — Looking to 2012, Sparks is predicting a budget shortfall that could be anywhere between $2.8 and $7 million, meaning layoffs and service cuts could be on the next fiscal year’s horizon.

The budget numbers and their potential consequences swirled around the Sparks Police Department’s conference room Tuesday as city leaders met for their annual workshop retreat. Amid hanging sheets of butcher paper with ideas scribbled on them, the City Council and Sparks department directors took their planning process back to square one.

“We are here to create a clear direction for the city for the next three to five years,” said Erica Olsen, co-founder of strategic planning company M3 Planning, which moderated the meeting.

Along with the talk of value statements and priorities, city leaders brainstormed new ideas for budgeting.

“As far as revenues go, it is really early in the game and we are going to have to react to it,” Sparks finance director Jeff Cronk said.

The reaction comes in the form of three plans for three different budget cut scenarios. The first plan is for a $2.8 million budget shortfall, which, according to Cronk, is at the low end of the scale. The second plan is for a $5.6 million shortfall, which is in the middle range. The third plan is for a potential $7 million budget cut.

City department heads have not prepared service cut scenarios for each number. But City Manager Carey could direct them to do so in the future.

“One of the criticisms in the past was that our numbers kept changing,” Carey said. “As such, we are trying to set three budget targets for next year from which to measure.”

Cronk added that as much as the city might plan, budget numbers might change.

“These estimates are based on reasonable assumptions and that’s the best we can do right now,” he said.

The unknowns lurking in the shadows were, according to Cronk, property tax assessment revenues, sales tax numbers and potential cash grabs from the 2011 Legislature.

“The big vulture in the sky, if you will, is what the Legislature is going to do,” he said.

City leaders were concerned that the state would divert tax revenues away from the cities in order to plug its own budget deficit.

“The state’s budget is not stable,” Carey said. “It is a $3 billion problem they need to tackle in 120 days with 46 new members. Revenues from our city will come under attack.”

According to a February 2010 joint statement from Reno, Sparks and Washoe County, the municipalities had about $30 million funneled away from local sales taxes and other fees to buoy up state coffers and programs after the 2009 legislative session.