The police department is having trouble meeting its budgeted size, and its staffing situation could get worse by August, the police commissioner, Raymond Kelly, said at a budget hearing yesterday.

The department’s budget sets aside money for 37,838 officers as of the January 1 hiring, but after that date this year the department had only 36,673 officers, 1,165 short of its target size, officials said.

Speaking at a budget hearing chaired by a City Council member of Queens, Peter Vallone Jr., Mr. Kelly said that if contract negotiations between the city and the Patrolmen’s Benevolent Association fail to yield an agreement, the force could dip further.

The department is likely to lose another 400 to 600 officers both to resignations and retirements over the next six months, he said. And without a new contract the low starting salary for new recruits will hinder hiring again, he said.

“If you can go to another jurisdiction and make $100,000 after a few years, including the Port Authority in New York City, quite clearly that is a pretty attractive salary for someone interested in law enforcement,” Mr. Kelly said.

The police department’s starting salary, $25,100, increases to $32,700 after a recruit attends the police academy for six months. Top pay, the highest base salary for a uniformed officer, is $59,588. Officers also get holiday pay and an allowance for uniforms.

The PBA has said its real problem in recruiting new officers is top pay.

Mr. Vallone said yesterday that staffing is an issue at the precincts in his district, and he added that the council would hold a public safety hearing on the issue.

The PBA and the city are embroiled in a complex labor conflict that does not appear to be clearing up, observers said. The two sides have been forced to go to binding arbitration to settle five of the past six contracts.

When the Public Employee Relations Board put forward a list of candidates for an arbitration panel, the PBA rejected it because it contained mediators who previously had been involved in PBA contracts — a violation of the PERB’s own rules, union officials said.

The city then filed a lawsuit to appoint its nominees automatically to the panel on the basis that the PBA refused to cooperate with the legally binding process.

To make things worse, an entirely new board is in the process of being confirmed after the gubernatorial transitions.

Since the starting salary for police recruits was cut to $25,100 from $36,000 in June 2005, the number of people applying for the police exam has dropped significantly. About 33% fewer people applied for the October 28 exam last year than in 2004. The police department and Department of Citywide Administrative Services have responded by increasing the number of exams available.

To accommodate the new strains on the department after the terrorist attacks of September 11, 2001, including the 1,000 police personnel who are devoted to counterterrorism every day, Mayor Bloomberg and the City Council helped approve a two-stage increase of 800 officers for the department in 2006. Those officers have yet to be hired.