NEW MILFORD — Town and school officials are starting to prepare for next year’s budget, but they have yet to figure out how to deal with the $2 million hole created in this year’s budget by state funding cuts.

New Milford is slated to receive about $2.2 million less from the state than it expected, Finance Director Gregory Osipow told the Town Council this week.

“These are structural changes, not cyclical, but we can expect these trends to continue, not just here, but all throughout the state,” Osipow said.

The biggest reduction is in Education Cost Sharing grant, which is money allocated to the town for school costs. This grant was cut by $1.76 million.

Less money is expected for other pools of state money, including the Pequot, hospital and roads funds.

“We need to keep this in mind for the next budget season,” Osipow said. “We’re already starting $2.2 million in the hole.”

Osipow said he has some ideas to address the shortfall but the town will need to develop a plan.

“I'm expecting the Board of Ed to come to the table and be a part of that solution,” he said. “I think we can meet in the middle of the road to come up a solution.”

Town department heads are compiling budget requests and school officials are discussing possible budget drivers.

Councilman Tom Esposito said the town can’t just send out a supplemental tax bill to cover the state funding cut.

“We’re going to have to sharpen our pencils,” he said.; 203-731-3345