NORTH ANDOVER — A five-year financial projection released by the town last night shows an estimated $2.9 million shortfall in next year's budget.

Town Manager Mark Rees cautioned that the fiscal year 2010 numbers are preliminary. They could change for better or worse as budget planning continues. But the selectmen took the news soberly.

"I think none of these numbers were a complete and total surprise," selectmen's Chairwoman Rosemary Smedile said after the board's meeting. "It's not great, but we've been proactive in preparing for this."

In the next couple of weeks, cities and towns across the region will be hearing similar projections as they head into the budget season, and will have to start considering what happens if these numbers prove accurate.

Late last month, Gov. Deval Patrick announced he would need to cut an additional $1 billion to close a deficit in this year's state budget, and the numbers are not looking any better for the next.

"We're not unlike any other town in the country," Smedile said. "We'll get through it."

Rees plans to present his budget in early February.

He said while he doesn't have a remedy for a $2.9 million shortfall, money could be saved in health insurance costs if the town is able to slash a projected 5.13 percent increase in half, or by $385,216. The town's Insurance Advisory Committee is working on plans to reduce health care costs, looking at joining other carriers like the state's Group Insurance Commission.

He said reducing both town and school operating costs from a projected 3.7 percent increase to 2 percent increase also would reduce the shortfall by $906,535.

Rees said there also is the possibility state aid will not be cut as some have predicted.

State aid makes up about 12 percent of the town's budget.

Smedile said the town has been preparing for this since the fall, settling "no raise" contracts, putting money aside wherever possible, and not filling open positions unless necessary.

Finance Committee Vice Chairman Mark Rodgers gave the same shortfall projection to School Committee members late last week, saying "all indications we're getting are that the numbers are going to be worse, not better. ... And that's our best guess right now as depressing as it sounds."

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