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Winchester is facing major budget cuts for at least the rest of 2020, according to the city’s proposed budget for the new fiscal year.

The draft budget was presented to the Winchester Board of Commissioners during Tuesday’s meeting. The commissioners are scheduled to go through the budget in detail in a pair of workshop meetings May 15 and 19.

In his memo included with the budget, Winchester City Manager Matt Belcher said the budget is based on an expected $1 million loss of payroll tax revenue in the first half of fiscal year 2021.

Payroll tax revenue accounts for about 51 percent of the city’s tax revenue, he said.

The budget does not propose layoffs or salary cuts, but there will be no across-the board raises or education incentives. No new positions will be created, and currently vacant positions will not be funded.

Belcher said he hoped to be able to re-evaluate those changes in the beginning of 2021.

All city departments will have a 25 percent cut, and transfers to outside agencies will also be reduced by 25 percent. Other cuts may be made depending on need, he said.

“This is a very lean budget, and we’ll have to have some very candid discussions,” Belcher said Tuesday evening.

The proposed budget includes an approximate $277,000 reduction in revenue for fiscal year 2021, and includes a $1 million transfer from the capital expenditure fund to cover the difference and shortfalls.

Belcher went on to recommend increasing payroll and real property tax rates to support critical services and the annual 12 percent pension increases, and establishing a surplus pension fund for additional increases.

“It will be a challenge,” Belcher said.

The new fiscal year begins July 1. The commission must approve the budget on two votes by June 30.

The commission also approved a grant application for Winchester Fire-EMS from the Assistance to Firefighter’s Grant program. The department is asking for three grants:

— $164,830 to purchase two cardiac monitors, two auto-lift stretchers and two ventilators. The city’s match would be $14,984.

— $490,000 to purchase a new fire engine to replace Engine 4, which is 36 years old. The city’s match would be $23,333.

— $48,750 to purchase a set of rescue stabilization struts. The city’s match would be $2,321.

The application was approved unanimously.

In other action, the commission:

— approved the second reading of a natural gas franchise agreement setting a 3 percent franchise fee.

— approved the second reading of a $5.595 million bond issue for Winchester Municipal Utilities.

— approved a contract to purchase property at 30 Lincoln St. for $26,000 as part of the Lincoln Street project.

— accepted the resignation of firefighter III/EMS Ian Skinner.