Selectmen are preparing to take a hard look at the town’s finances as they face a potential loss of $1.3 million in state funding to the municipality at the start of July.

Budget Committee Chairman Peter Rayno urged selectmen to take a creative and radical approach to budgeting this year during a joint workshop between his committee and the board on June 8 amid rising concerns that the town will not receive an anticipated $1.3 million in funds from the rooms and meals tax. He called on the board to consider pursuing a zero-based budget as the budget process begins.

“The economic conditions right now ended up much worse than we expected. A lot of the decisions that we made (last year), if they had to be made in March or April, would have been made differently,” Rayno said. “We must act responsibly.”

Fellow committee member Stephen Campbell told selectmen that the situation called for a careful examination of every line of the operational budget for extra savings, from reconsidering paint jobs for police cruisers to possible layoffs at town hall.

“We have to make some fundamental changes regardless of whether the recession is going to last a year or two,” Campbell said. “We have to look at every single line and wring money out of the operational budget. That means fewer employees two years from now than we have now.”

Selectmen did not come to the table empty handed, indicating that the board would consider furloughs for town employees, pay cuts or a fourday work week to make up for possible shortfalls in state funding. Chairman Arthur Barnes pointed to potentially running differential shifts – keeping more municipal employees on the job during the day than at night – while Selectman Patrick Hargreaves pushed to replace the town’s fleet of Ford Crown Victorias with Chevrolet Impalas.

“We’re all in agreement that we’re in a bad situation,” Hargreaves said. “Every little bit is going to help us.”

The town is already grappling with a projected budget shortfall of roughly $400,000 when selectmen sit down to consider the tax rate in October. Officials have since implemented a hiring freeze for town employees, leaving four already vacant positions open for the foreseeable future with a savings to the town of roughly $317,000.

Though officials on both the budget committee and the board of selectmen indicated that they would prefer to avoid layoffs, the measure may become a reality depending on the state’s budget.

“The big thing is if we lose that $1.3 million on July 1. I don’t think there is any alternative than to lay people off. We have limited alternatives.