Saint John council has voted to cut $9 million from city programs and services across the board.
Council voted seven to two in favour of the so-called Plan B budget during a special meeting on Wednesday night.
The 2012 city budget is $144 million.
It shaves $8 million from operations and $1 million from the water and sewerage budget.
The cuts affect nearly every city department, including police and fire.
More than 50 jobs could be on the chopping block, along with grants to community groups, and planned raises for managers.
City manager Pat Woods had recommended council approve Plan B because the city's pension deficit has ballooned to $190 million, up from $163 million.
That means the city will now need an additional $13 million a year if the provincial government does not approve proposed changes to the city employees' pension plan, Woods told the crowded council chambers.
Councillors hope the provincial legislature will approve several changes to the city's pension plan, such as cuts to cost-of-living increases, to help deal with the plan's deficit.
But the legislature doesn't sit again until March.
If the changes aren't approved, the city will now have to come up with the extra $13 million annually, up from the $9 million it initially thought, said Woods.
The Plan A budget, which would have maintained the tax rate and avoided major service cuts, would have put the city at too much risk, he said, noting $13 million amounts to about 10 per cent of the annual budget.
Mayor Ivan Court called the ballooning pension deficit "devastating news."
Council held the special meeting to try to finally reach an agreement on the budget. Council members had been deadlocked over what to do.
Coun. Gary Sullivan said the division among council could have been resolved quickly if the provincial government had just sent a signal that the city's plan to make cuts to retirement benefits will be allowed.
Justice Minister Marie-Claude Blais has declined to comment on the issue.
Saint John MLAs Glen Tait, of Saint John East, Dorothy Shephard, of Saint John Lancaster, and Carl Killen, of Saint John Harbour, also offered no comment.
Jim Parrott, the MLA for Fundy-River Valley, and Trevor Holder, the Minister of Wellness, Culture and Sport, Minister of Tourism and Parks and the MLA for Saint John Portland, did not respond to CBC News' request for an interview.
Deputy Mayor Stephen Chase and three other councillors who favoured making deep cuts to expenditures petitioned the clerk to call the special meeting.
"I think it's time we positioned our budget to cushion rising costs in labour, goods and services," Chase had said earlier Wednesday.
Meanwhile, the mayor and four councillors were on the other side of the debate, wanting to make the least cuts possible without raising taxes.
"If we go with plan B we're going to take $9 million-worth of service delivery out of the city of Saint John that will never return," Court had said.
Coun. Donnie Snook had said he hoped the upcoming municipal election in May wasn't playing a role in the stalemate.
"Actually that's been thrown around quite a bit at all of us. And I, for one, would prefer not to have the view of the election kind of being the motive behind everything a councillor says or does at this point," Snook had said.
Snook said he understands the trouble over the budget isn't sitting well with Saint Johners and he was eager to resume budget discussions in open session.
Members found themselves at a complete deadlock on Monday night and couldn't even agree to put the matter on the council agenda.