The Oak Bluffs town administrator said this week that the town must lay off at least five full-time employees and make deep cuts to the elementary school budget by early fall in order to stem an operating budget deficit that is estimated at nearly $800,000 across two fiscal years.

“We need to cut at least five positions to get the budget where we need it to be,” said town administrator Michael Dutton. “Right now we are talking with the personnel board and department heads while we identify the five positions [that might be eliminated]; this will be a collaborative decision.”

The town ended the fiscal year on June 30 with a deficit of $300,000 and is facing another $500,000 shortfall in the year that began July 1.

Early retirement has been offered to town employees, although there have been no takers, and a hiring freeze is in effect.

But Mr. Dutton said it is not nearly enough.

“We can’t take a business-as-usual approach; we have to make some real changes. Whether that mean layoffs or streamlining departments or even joining with other towns to regionalize positions and services . . . everything is on the table right now,” he said.

Selectmen are expected to discuss the budget at their next regular meeting on Tuesday, when they are expected to schedule a special town meeting for late summer or early fall for voters to consider major reductions in spending for the current fiscal year.

Mr. Dutton said dates under consideration for the special meeting are Sept. 22 and Sept. 29; the meeting must take place by the end of October in order for the state Department of Revenue to sign off on next year’s tax rate.

The exact amount of the deficit for the fiscal year just ended will not be known until auditors complete their work and submit a final report to the town. But the number is estimated at $300,000.

And because the town ended the year with a deficit, the Department of Revenue will likely lower the amount of the town’s certified free cash at the end of this year.

This in turn affects how much the town can take from its stabilization fund, Mr. Dutton said.

A recent report from Mr. Dutton and finance director Paul Manzi recommends the town make up the $500,000 shortfall by cutting $300,000 from general government and $200,000 from the Oak Bluffs School.

School leaders say the cuts will be no easy task; two full-time assistant teachers were already let go this summer.

Complicating matters, the school has been cited by the state Department of Education for the past two years for failing to meet its adequate yearly progress for the Massachusetts Comprehensive Assessment System (MCAS) test in the special education and low-income subgroups.

This has forced the school to spend 10 per cent of its Title 1 funding on professional development and another 20 per cent on after-school tutoring.

Principal Laury Binney said this week the problems with the MCAS scores will make cutting the school budget that more difficult.

“It’s not like we can just cut the money from textbooks or supplies,” he said. “We’re talking about possibly getting rid of teachers and programs, which will have a direct effect on students. Considering where we are [with MCAS], the timing is especially bad.”

But Mr. Binney said school leaders will do their best to work with the town and make cuts where possible.

“As far as we’re concerned, they [town leaders] have done their best with a very difficult situation . . . each department must try to do their part, and that includes the school,” he said.

Vineyard schools superintendent Dr. James H. Weiss said staff cuts may be inevitable.

“We’re not going to make that up by cutting back on paper clips and toilet paper. Every effort will be made not to cut staff; but that is a large amount to cut,” he said.

School committee chairman Priscilla Sylvia said the school advisory council will meet in the coming weeks to discuss possible reductions in the budget. If any staff cuts are made, she said, they will be announced after the special town meeting.

Ms. Sylvia also took a broad view of the current budget crisis.

“We’re in this together. It’s terrible, and I wish we weren’t in this situation, but we all have to work together to get through this,” she said.