The claws of a sinking U.S. economy dug into parish government this week when Parish President Kevin Davis introduced a $99 million budget for 2009, 6.5 percent less than last year’s and among the largest yearly downswings in recent memory.

Directly attributable to slumping retail sales and a “serious downturn” in the local housing market, the reduced budget kills employee merit raises, halts all new personnel hires — sans two new judgeships — and postpones a myriad of new road projects, Davis told Parish Council members Thursday night.

“As we deliberate over our budget for next year, the national economy and international economy are facing the greatest financial crisis since the 1930s,” Davis said. “The core of the crisis directly impacts our local economy, which has historically rested on the development and growth of the housing market.” Building permits for residential construction dropped from a high of more than 2,900 in 2004 to less than 1,000 projected for all of 2008, Davis said. He attributed the loss — expected to continue for years — to four hurricanes since 2005, overbuilding of homes in some local housing sectors and the nation’s credit crunch.

“The local housing market alone is in a serious downturn,” he said.

And while Davis on Thursday called the budget “conservative,” he told council members “we must” meet over the next few months to tweak and modify the plan before its adopted. He asked the council to brainstorm new ways to boost revenue streams while implementing other cost cutting methods.

Meanwhile, individual projects, such as the Children’s Museum in Mandeville and University Square, a college campus and research facility in Lacombe, will continue to be funded through grants, private monies and other resources, he said.

Perhaps the largest visibly hit sector is in the parish’s road building program. Two years ago parish government plowed forward with an aggressive campaign — funded last year in part by a $50 million bond issue — to fix and improve local roads while also designing and implementing improvements to state roads, typically out of its jurisdiction.

Facing a lag time of several years or more to fix and improve heavily congested state-owned thoroughfares, Davis literally bulldozed forward with state roadwork needs done now, only to be reimbursed by the Department of Transportation and Development later.

“As you know we have a very aggressive road building campaign over the past two years. You will see even more projects under construction for 2009,” Davis said. “”However, the losses of approximately $5 million in sales tax revenue to the road fund has meant that we must postpone the construction of new road projects until additional revenue is found.”

The general fund, also strained by the loss of commercial and residential permit fees, could be facing a years-long recession, Davis said.

And with nationwide credit calamity on the horizon, if it’s not already arrived, financial belt tightening could maim the local economy even further.

“Unless corrected, the credit crisis will create a financial mess that will take the St. Tammany Parish economy considerable time and effort to overcome,” Davis said.

Davis, however, hushed all the doom and gloom.

“I believe we have a solid budget for 2009,” he said.