Cambridge will need to make drastic cuts in next year's budget to keep the city in sound fiscal health, according to Councillor Edward N. Cyr.

Pointing to figures released last week by City Manager Robert W. Healy and City Treasurer James Maloney that indicate the city will exceed its ability to tax by $300,000 in the next fiscal year, Cyr said that the city must act now to trim the upcoming expenses.

Cyr sponsored an order saying that residents had not yet realized the gravity of Cambridge's financial state and called for a "city summit" to discuss creative ways to reduce expenditures.

"I am imploring all councillors to put aside little concerns with the profound sense of significance of this challenge," Cyr said during Monday night's meeting.

Cyr's order also warned city officials and citizens that they may be forced to try to override Proposition 2 1/2, the state law that forbids towns from raising property taxes more than 2.5 percent over the town's levy limit. The levy limit is a sum based on the value of real estate within the municipality. In recent years Cambridge has had more flexibility in setting tax rates, because it has remained below this mark.

However, Cyr said the city is threatened by the Weld Administration's proposal to cut local aid by 10 percent. Such a reduction would cost Cambridge $4 million at a time when declining revenues from property taxes brought on by the state's recession already put the city in the "perilous position" of losing its former levy flexibility.

"For the first time in eight to ten years we are at our levy limit. And it is a dangerous place to be," said Cyr in an interview after the meeting. "It is a disaster. We need to act now. A small step this year will allow us to avoid walking off the cliff next year."

The council's fiscal debate permeated the entire session as the legislative body debated the expenditure of $6 million of unexpected revenue from the Cambridge Hospital.

The revenue, which was generated because the hospital served an extraordinarily large number of patients, will be used to cover costs and make new capital improvements in both the hospital and Neville Manor, the city's nursing home. In addition, approximately $1 million will go to creating a new health clinic in the Riverside neighborhood of Cambridge, which hospital administrators say will further increase the number of patients using the hospital.

Although the expenditure passed unanimously it sparked the longest debate of the evening. Councillor William H. Walsh asked Healy and Cambridge Hospital Administrator John O'Brien how many people use the present Riverside clinic. Walsh also questioned the wisdom of spending money on the hospital improvements when the city faces drastic budget tightening.

"As we sit here I understand the city faces severe fiscal problems. We can't recruit new police officers, we face teacher layoffs and no increase in pay for teachers," said Walsh.

But Healy said the money for the clinic and the other expenditures are necessary to make the hospital more profitable in the long run and to ensure the institution's long-term stability.

"The recommendation is to appropriate the sums necessary to cover the costs and make those capital improvements necessary," said Healy. "It is an investment in the future. We are at a critical juncture."

Vice Mayor Kenneth E. Reeves '72 agreed with Healy and took particular note of the need for an expanded clinic in the area.

"[The present Riverside clinic] is inadequate in every way," said Reeves. "I think we should be proud of the neighborhood health clinics. An expanded clinic would be able to serve a broader cross section of the community."