Oak Bluffs leaders said this week that a special town meeting will be held in late summer where voters will be asked to cut approximately $500,000 from next years’s budget — approved at town meeting only two months ago — in order to ensure that the state Department of Revenue will sign off on next year’s tax rate.

Finance director Paul Manzi estimated the budget for next year, starting July 1, will need to be cut between $350,000 and $600,000, largely due to shrinking local receipts, including for motor vehicle excise taxes, trash stickers, building fees, marina fees, investment income and licenses and permits.

Mr. Manzi said town officials plugged in what he termed conservative numbers when they drafted the budget before the town meeting, but apparently they were not conservative enough.

“When you put together a budget, you have to make some predictions. You look at what you took in the year before for revenue and local receipts and make your best guess. This year, the numbers are down in many areas, which affects us not just this year but next year too,” the finance director said.

Mr. Manzi said the state has not told the town it needs to reduce its budget for next year. But with local receipts seeing a sharp decline, casting doubt on the projections for next year, he said the prospect is real that the department of revenue could refuse to ratify the town tax rate.

“You can’t increase the actual [numbers]. The state audits our numbers, and they won’t set a tax rate based on numbers for revenue that don’t match what the town took in [during the current fiscal year],” he said.

Mr. Manzi said state aid will also be down again this year, giving more incentive to hold a special town meeting in late summer or fall.

“We don’t have the cherry sheets from the state yet; we don’t know what the numbers will be. But there is talk that state aid, Chapter 70 [educational money], Quinn Bill money, all of that will be down . . . it is not unusual to hold a town meeting in the fall to make adjustments. We have done it in the past,” he said.

In response to the bleak economic prognosis, the town finance and advisory board will hold a series of meetings over the next few months to discuss the situation and prepare a plan for the special town meeting. At a meeting yesterday, Mr. Manzi distributed an update on local receipts and state aid which showed that revenue is down almost across the board.

Motor vehicle excise tax, budgeted at $674,827 this year, has brought in only $577,528 through the end of May, off by 14 per cent. Marine receipts, budgeted at $954,764, have brought in only $799,112, 16 per cent less than projected. Income from trash stickers is off 38 per cent, bringing in only $184,974 although projected at $249,701.

Revenue from building permits is off nearly $100,000 from the $409,000 projected; and investment income is more than $100,000 short of the $155,547 projected, bringing in only $45,501 so far.

The figures for state aid are equally bleak. Education aid is projected to be $66,147 less than projected; charter tuition is off $34,427; lottery funds are expected to be down $14,344, and police career assistance under the Quinn Bill is expected to be off $92,820.

Overall, local receipts for the current fiscal year are down an estimated $534,540, and state aid is projected to be down $126,478. Mr. Manzi noted that state aid could increase or decline dramatically over the next few months based on a variety of factors, including whether federal awards funded through President Barack Obama’s stimulus package are approved.

Mimi Davisson, chairman of the finance committee, said this week that everyone involved in drafting the budget has done their best to project revenues while drafting a responsible spending plan. Although she has not checked with other towns, she speculated they also will see revenues decline and will have some tough choices to make over the next year.

Ms. Davisson said Oak Bluffs — perhaps more than other towns — does not solely rely on property taxes to pay for town services, and instead has a diverse revenue stream that includes the harbor, hotel taxes and new construction. Although this is usually a positive, it creates problems when the economy takes a turn for the worse, as it did this year, she said.

“The revenue projections are going south, that’s a function of the bigger economic picture. Every week the numbers seem to change; and all we can do is make adjustments and plan accordingly,” she said.

Ms. Davisson sent a letter to the Oak Bluffs school, the town school committee and the Martha’s Vineyard Regional High School under the heading “Early Alert about the Oak Bluffs FY 2010 Budget,” warning them to start thinking about makings cuts immediately.

“ . . . the prognosis for the town’s FY 2010 budget . . . is not good. We are asking all groups that receive funding from the town to begin planning for budgetary cuts, even before the fiscal year begins. Oak Bluffs is facing a $600,000 shortfall in revenue for the current fiscal year, “ she wrote in part. She also wrote:

“The shortfall that Oak Bluffs is experiencing will repeat itself next year, and possibly get worse . . . Please keep the town’s budget situation in mind as you make contractual and other commitments. It is especially important to consider the long-term financial commitments that are implicit in the decisions that are being made today. Perhaps some of those decisions can be deferred.”

Oak Bluffs school committee member Priscilla Sylvia said yesterday her board has already met with town administrator Michael Dutton to discuss the problems. She said the school committee will help in any way possible.

“We want to do our part; we know we are in this together. We just don’t know how we are going to do our part. It’s still too early to tell,” she said.

The prospect of possible employee layoffs, under discussion as a way to cut costs, has already proved divisive.

In April a memorandum went out to town employees offering an early retirement to all workers.

Employees not currently eligible for retirement would receive a one-time payment of $5,000 under the plan, and receive all their accrued vacation time and half their accrued sick time up to 60 days. Employees who are eligible for retirement would receive a biweekly payment of the remaining balance in the position’s salary line item or regular hourly pay rate through July 2.

But Kerry Scott, the only selectman to vote against the voluntary retirement plan, according to the minutes of an April 28 executive session meeting, said layoffs should be considered a last resort.

“We need to spread the impact. If we do our homework, we can find cuts with minimum impact to town services,” she said. “But as a general rule, I think layoffs should be avoided at all costs.”

Ms. Davisson agreed.

“They should be considered a last resort, and a last resort only,” she said.