SAN FRANCISCO (Legal Newsline)-The country's economic woes have reached the one city that even a few months ago seemed immune thanks to a tourist economy fueled by the rising value of the Euro.

The San Francisco Board of Supervisors held an economy summit on Tuesday following a news conference called by Mayor Gavin Newsom on Monday, during which Newsom said the downturn had begun to hit very close to home.

"The business community in San Francisco has been impacted in a significant way," Newsom said. "We've anticipated a slowdown, but we did not anticipate a slowdown of this magnitude. In the past few weeks specifically, we've seen a dramatic decline."

Newsom insisted that the overall economic outlook for the city remains strong, but that budget adjustments are now necessary.

During the summer, Diarmund O'Brian, a physicist from Ireland vacationing in the Bay Area, said showing the prices of a San Francisco restaurant menu would motivate anyone from Europe to travel across the ocean.

"The prices are wonderful compared to back home," he told Legal Newsline, "especially when you factor in the exchange rate."

Former Mayor Willie Brown, who writes a weekly column for the San Francisco Chronicle, wrote this summer that from his observation all the major restaurants and shopping centers in the city were packed, but that nobody was speaking English.

Apparently even that cash cow has begun to dry up, however. Newsom said revenue from sales taxes had slipped, and that the city now faces a budget deficit of $250 million.

The city initiated a hiring freeze. Newsom said layoffs are expected in the near future.

During the economic summit, Newsom is expected to ask the Board of Supervisors to cut spending on most new programs and perhaps to reconsider budget cuts he proposed during the last budget session that they refused to approve.

Also on Tuesday, Gov. Arnold Schwarzenegger said the states' budget, which was passed just over a month ago after a historic three-month impasse, will need to be reconsidered immediately.

Schwarzenegger said he will call legislators back to Sacramento to begin work on the budget crisis that has become so severe it can no longer wait until the new legislature is sworn in on Dec. 1.

The move is a highly calculated effort to sway legislators who will not return in December to pass unpopular changes like a temporary tax increase they ordinarily might not be willing to do.

While the exact state of the state's economy is not yet known, Schwarzenegger finance staff estimates that revenue has dropped $3 billion for the current fiscal year, which started July 1.