Officials said that layoffs and pay cuts are possible to help balance the 2013 budget.
State Auditor Dave Yost placed Chillicothe on "Fiscal Caution" because of a $1.5 million deficit.
Much of the deficit is from police and fire pension funds.
The state requires 1/12 of the city's expenditures to be part of a carryover balance when fiscal caution is declared, The Chillicothe Gazette reported.
City Auditor Tom Spetnagel said that the city needed to balance the budget by Jan. 1.
Officials said that it was too early to tell what cuts would be made.
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