SHUTESBURY - Town Meeting agreed Saturday to keep a high level of cash on hand while reducing budgets for the coming fiscal year.

"This is a really austere budget," said Eric Stocker of the Finance Committee. State aid is down "drastically," he said, and the budget contains no cost-of-living raises for employees.

The $5.4 million budget represents a small decline over this year's spending, which was up by 6 percent over the previous year. That increase was due to an override of Proposition 2½, which "solved our structural deficit," he said.

At the start of the fiscal year July 1, Shutesbury will have $757,716 in total reserves, or 14.73 percent of the budget. The state likes to see a town's reserves at 10 percent, Stocker said.

"We're an island of fiscal sanity," he said. "The financial health of the town is dependent on what we have in the bank."

The reason for the caution is the uncertain cost of the cleanup of contaminated soil near the fire station. This was caused by a buried gas tank that was discovered when the road was repaired last year.

Shutesbury has already spent $60,000 on the cleanup and much more remains to be done, Stocker said. A professional involved with the project told him it will probably cost "hundreds of thousands of dollars," he said. There is no state or federal money available, and it's hard to get loans for the project, he said.

"These are healthy reserves, but they will dissipate quickly," Stocker said.

The only contested vote Saturday was over the $1.6 million elementary school budget. The School Committee trimmed it several times at the Finance Committee's request, but balked at an additional $8,510 cut last week.

Michael De Chiara of the School Committee said that this cut could have an impact on staffing. There are so many uncertainties about state aid that the higher spending level should remain, and be cut in the summer only if necessary.

But Elaine Puleo of the Finance Committee said that it would not be equitable to keep the school spending when other parts of the budget have been cut. Stocker said, "It's more fiscally responsible to deny (the money) and restore it later."

Town Meeting agreed with the Finance Committee's position, on a vote of 30 to 25.

Town Meeting approved the regional school budget with a package of cuts, as Leverett's did on April 25. Amherst will push for a higher level of cuts, Puleo said. But if Pelham goes along with Leverett and Shutesbury, Amherst will have no choice but to fund the budget, as the regional agreement stipulates that it is enacted when three towns support it.

In an uncontested election, Puleo will replace Ralph Armstrong on the Select Board. Clif Read and Marina Dooley-Carvalho will replace Marianne Jorgensen and Daniel Greenberg on the School Committee.