Higher costs for fuel and health insurance, combined with the tumult of the nation’s economy and a new unfunded state mandate, made this the toughest budget in Tim Demler’s 14 years as town supervisor.

Still, Demler’s $12 million spending plan for 2009, which he unveiled Wednesday, holds the line on taxes except for in two areas — the fire and refuse districts, both of which experienced increases due to contractual obligations.

As it stands now, the town’s master sewer district tax rate is higher because of new state Department of Environmental Conservation-mandated storm water regulations that take effect starting with next year’s budget.

The supervisor expects to offset that increase — which he estimated would cost residents $280,000 — by applying $126,000 in surplus to that budget item.

The DEC regulation was the first unfunded mandate Demler has had to tackle, and he had harsh words for those responsible for it. “This budget was the most difficult one because of an unfunded mandate,” he said.

“I’m not sure that some bureaucrats at the state level really care what they do to municipalities or counties. I’m not so sure that all the money spent on storm water management is money well spent. I think a lot of it is, but a lot of it isn’t,” Demler added.

The clean water/storm water regulations require municipalities to take responsibility for inspections and other things that the state DEC typically handled, town attorney Robert O’Toole said. The new requirements also place additional fees on municipalities.

Although it won’t take effect in next year’s budget, Demler announced he will be proposing that all town employees contribute about 10 percent toward their health insurance premiums, something he said no other town or city in the area has done.

While the proposal may not be popular with some employees, it is necessary, “as I believe that the days of government paid-for health insurance at 100 percent for employees is no longer allowable in these tough economic times,” Demler said.

He added that taxpayers co-pay for health insurance at their jobs and that it’s time for government to follow suit.

The change in employee health care contributions would complement the retirement of two bond debts in the water and sewer department for the 2010 budget. Those two things, Demler said, should yield lower taxes for residents during that budget year.

All told, the town’s expenses have risen approximately $400,000 this year while revenues are down $300,000, largely due to the credit crunch, fewer building permits and lower interest earnings.

“Despite these devastating problems and the requirements by the state to create a mandated storm water fee, we have bridged that gap through hard work and some cuts in unnecessary line items,” the supervisor said. “We have bridged the $1.6 million gap and held the line in our budget.”

Demler’s budget includes funding to repaint three CSX railroad bridges in the town, plus the installation of new dugouts and baseball diamonds.

The Town Board will review the supervisor’s budget. A public hearing is tentatively scheduled for early November. The board has until Nov. 20 to adopt the spending plan.

Contact reporter David J. Hill at 693-1000, ext. 115.