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City officials approved a tough, austere draft budget for the new fiscal year on Tuesday.

Winchester Mayor Ed Burtner said the city is expecting a $1 million drop in payroll tax revenue in the new fiscal year. The payroll tax makes up slightly more than half of the city’s tax revenue.

“The budget process has been very, very difficult,” Burtner said Tuesday evening. “Our economy hopefully is coming back. Hopefully it will rebound, but we really don’t know.”

The cuts this year are wide. The city’s contributions to a number of community non-profit groups were cut by more than half, from $1.039 million to $493,000, he said.

“These agencies we have supported in years gone by, but we will not (this year),” Burtner said. “It’s just we can’t afford it.”

Some organizations, such as the Bluegrass Heritage Museum and the Clark County GIS Consortium, saw their funds cut. Others, including the Daniel Boone Pioneer Festival and the Heritage Commission, saw them eliminated completely.

The budget also includes a hiring freeze for the city, in which vacant positions will not be filled and new jobs will not be added. The city also plans to leave employee salaries unchanged.

The commission also removed $250,000 earmarked for a splash pad and another $75,000 for silo renovation on Depot Street from the budget, though commissioners promised to revisit the situation later.

The bit of good news is the state legislature suspended the annual 12 percent contribution to the retirement programs, which will save the city about $334,000, Burtner said.

Getting the budget to balance, as required by state law, required a $1 million transfer from the city’s capital project accounts. That means no major projects or purchases within city government, such as a new ambulance or a new salt storage building for the road department.

The draft budget calls for anticipated revenue of $17.37 million with expenses of $18.23 million. The $1 million transfer will leave the city with a slight positive balance, coupled with an anticipated carryover balance.

Winchester City Manager Matt Belcher said he plans to revisit the budget in January, which would be the midpoint of the fiscal year.

Burtner said he anticipates the first reading of the final budget at the commission’s June 2 meeting. The budget must be approved with two readings and votes prior to the end of the fiscal year on June 30.

In other action Tuesday, the commissioners:

— approved a grant application for the Winchester Police Department for 911 communications equipment.

— approved resolutions for a 1 percent payroll tax incentive for Infiltrator Water Technologies and Danimer Scientific for 10 years.

— approved an order authorizing the purchase of road salt for fiscal year 2021.

— reclassified Jacob Walson from police officer III to police officer II

— rescinded an order promoting Jacob Allen to EMS officer (major) and approved an order promoting Allen to EMS officer (lieutenant)

— accepted the resignation of Joseph Breeding.

— terminated the employment of patient transfer specialists Kristin Winters, William Reed, Shane Long and Alitia Hill.