A good old-fashioned battle of ideologies broke out following a budget committee meeting at city hall on Tuesday, with councillors calling for either service cuts or tax increases to balance the books.

Coun. Gord Perks said reports that the city is set to lose $774 million next year are highly exaggerated. Perks said the actual shortfall is likely about half what Mayor Rob Ford has suggested.

Perks said council can right the city's financial ship with a few minor changes, and the city does not need to hack public services to pieces to balance the books.

"This is the mayor that is crying wolf. He is crying wolf and hoping that we are all terrified sheep. I am not going to be one of the terrified sheep and from what I hear from my constituents they don't want to be terrified either. They want to stand up for good, strong well-delivered public services," Perks told reporters on Tuesday.

"I think we are in a financial situation where, with a modest tax increase and a TTC fare increase next year, we could make it."

Budget Chief Mike Del Grande, however, suggests it will take more than tinkering to get the city's books in order.

"We've done all kinds of crazy things down here to try and make it balance. We have sold our furniture to pay for the rent, and the furniture is running out," he told reporters. "The City of Toronto has no choice but to do what most families would do in economic difficulties. Either you get a second job to bring in more income or reduce your expenditures."

Staff has been conducting a city-wide core service review to find ways to trim the 2012 budget.

The $774-million deficit expected in 2012 does not include the mayor's promise to remove the land transfer tax, which would cost an extra $300 million annually. Del Grande hinted on Tuesday that the land transfer tax may survive, at least through 2012.

Meantime the TTC is also looking to cover a deficit, with a new report suggesting the public transit provider will see a $39 million shortfall this year.

With a report from CTV Toronto's Alicia Markson