As he puts the finishing touches on his budget proposal, Town Manager Richard Montouri believes that layoffs of municipal workers can be avoided in Fiscal Year 2012.

"As it stands right now there won't be layoffs," said Montouri, after Tuesday's Board of Selectmen's meeting. "There may be some positions that we don't fill (when they become vacant)."

Todd Johnson, chairman of the Board of Selectmen, said newly elected state Sen. Barry Finegold, D-Andover, had been in touch with town officials and told them to expect a 5 percent cut in Ch. 70 (education) aid and a 10 percent reduction in unrestricted state aid.

If Finegold is right, that would mean a loss of over $1 million in state aid for the town's operating budget.

" I hope I am wrong but realistically, we are looking at another tough budget year, and it’s important that our communities be prepared for a possible cut to local aid," said Finegold.

Despite the projected cuts, Montuori believes a balanced budget is doable without layoffs.

Montouri told selectmen that he was close to finish a balanced budget when an 11th hour monkey wrench was thrown into the process. According to Montuori, the Middlesex Retirement Board handed down a ruling which limits the portion of unfunded liability and pension payments related to Water and Sewer Department retirees that can be allocated to the Water and Sewer Enterprise Fund.

Montuori said he still needs to consult an actuary but expects that the ruling will result in between $100,000 and $400,000 in expense being shifted from the Water and Sewer Enterprise Fund to the main budget.

While this will have an adverse impact on the general budget, it will help, at least in a small way, water and sewer customers that have been hit with massive rate increases over the past six months.

Despite the bump in the road, Montuori said he has been pleased with the budget process and lauded the work of his department heads.

"The department heads have been terrific," said Montuori. "They have been professional and very cooperative. I couldn't ask any more in a budget process."

Montuori also told selectmen that the budget crunch would mean no new capital projects for FY 2012.

Montuori will present his FY '12 Budget proposal to selectmen at their Jan. 26 meeting.

Johnson said he has invited the town's Legislative delegation, which includes Finegold, state Rep. Jim Miceli, D-Wlimington, and state Rep. Paul Adams, R-Andover, to appear before the board on Feb. 8 to discuss state aid and budget-related issues.