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CHICAGO (CBS) ― Mayor Richard M. Daley on Thursday announced some serious belt-tightening at City Hall, including a hiring freeze and a ban on most overtime.

Daley also announced a 3 percent across-the-board budget cut in non-personnel areas, voluntary furloughs, and travel restrictions.

As CBS 2's Katie McCall reports, Daley believes we are in a recession and, just as businesses have to tighten their belts, he says the city has to do the same thing.

The only exception to the overtime ban would be for safety and security reasons. The Police and Fire departments and the Office of Emergency Management and Communications would be part of the overtime ban, but only for functions that are not critical to the city's safety, the mayor said.

In what the city's Chief Financial Officer Paul Volpe calls a proactive move, Daley is making some major cuts to keep the city out of financial distress.

"It would be irresponsible not to look at what's happening in the housing market and understanding where it may manifest itself in our budget," Volpe said.

"Taken together, I believe these steps can reduce spending by $20 million by the end of the year, which is really important," Mayor Daley said. "I want to ensure our taxpayers that if we need to take additional steps down the road to cut spending even further in order to stay ahead of a slowing economy, we will do so."

The cuts were prompted by the slowing economy that has been on the brink of recession, the deepening mortgage crisis, and increased spending because of the long and harsh winter, Daley said.

While the economic climate is brutal across the country, the actual climate in Chicago has been costly. Water main breaks like the massive one in Ravenswood, potholes and snow removal have taken a big bite out of the budget.

The city budgeted $18.5 million for snow removal this year and through February has already spent $23.4 million.

"The bottom line is that the worse the winter is the more cost the city has to deal with," Daley said.

The city says some services will be affected by the cuts, but snow removal is considered an emergency so the streets will be cleared no matter what.

Also under Daley's plan, the Budget and Procurement offices would have to renegotiate some vendor contracts, and choose new ones based on their worth and potential for savings, which the mayor's office says could save up to $2.5 million by the year's end.

All non-critical out-of-town business travel would be suspended, with the exception only of senior city officials on official business and regulatory or required events, the mayor's office said.

Eighty non-union jobs will be cut – those jobs were vacant and will not be filled. Non-union workers won't get a raise for the next six months

The mayor says despite everyone's best efforts, city residents will likely notice some reduction in city services when the budget cuts take effect.

Meanwhile, Mayor Daley said the city is continuing to implement savings plans that were included in the 2008 budget, including a delay in pay raises, the elimination of vacant positions, and a plan to close tax loopholes for cable and online hotel reservations.

Daley is also pursuing the long-term lease of the city's three Materials Recycling and Recovering Facilities and the metered parking system at Midway International Airport.

CBS 2's Katie McCall contributed to this report.

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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