The downturn in consumer spending has Windham officials watching the town’s revenue streams and preparing for budget cuts should the economy fail to rebound.

Town Manager Tony Plante told councilors last week that town revenue, including excise tax, state revenue sharing and interest income, is down, which will lead to a projected $750,000 budget shortfall if the problem persists.

As a result, Plante has implemented a hiring freeze, deferred any capital expenditures, and suspended road resurfacing work and the use of carryover funds, making up around $768,000, or a little under 5 percent of the budget, for this fiscal year.

“We’ve been able to cover the shortfall that we’ve seen,” said Plante, who attributed the slow revenue to the lack of car sales, lower statewide sales and income tax revenue, and lower interest rates. “If the shortfall grows, we will have to identify actions that we can take to reduce spending should the town’s revenue continue to deteriorate.”

Councilor Donna Chapman said the town could be in a better position to handle the downturn if the Town Council had increased the undesignated fund balance during the last budget cycle, as was suggested by Chapman and fellow councilors Blaine Davis and Kaile Warren. They hoped to increase the fund to equal 12 percent of the budget; it is now around 8 percent.

“We tried to address it this last cycle, but we were voted down,” she said. “If we had the undesignated fund balance with a heavier cushion, we could use it.”

If revenue continues to fall, it could cause problems for Windham as the town prepares future budgets. It is unclear how long the downturn will last, Plante said, with expert opinions ranging from mid-2009 to the end of 2010.

Town officials will have to monitor the situation as the budget process proceeds, Plante said. If the gap between revenue and expenditures continues to grow, the town may have to consider more drastic cuts, he said.

“These measures could very well include staff reductions, work schedule cutbacks, and reductions in operating hours, programs and services, as well as deferring capital and other expenses,” Plante told councilors Nov. 21 in his weekly report.

Chapman said she would prefer to see the hours of some town office employees reduced rather than cutting whole positions.

“I don’t want anyone to lose their job,” she said. “But I would cut back to four days a week if we have to save some money.”

Recessions stretched over a couple of years have hurt Windham before, Plante said. When he arrived in the mid-1990s, the town’s fleet of vehicles was in bad shape after capital expenditures were curtailed during the early part of that decade.

If the economy stays in a downturn late into next year and beyond, Plante recommended that town officials formulate a series of budget options. It would be wise, he said, to make smaller cuts in a wide range of places.

“It’s not all going to come from one place or another,” he said.

It is a situation that bears attention, Plante said, and detailed decisions cannot be made until the full scope of the situation is understood.

“We haven’t made any long-term decisions,” he said. “We are just on the edge of this thing.”