TOWNSEND -- A significant reduction in regional school assessments means more money can be used for municipal expenses in fiscal 2014. For town employees, this means a raise.

Due to a change in the minimum contribution set by the Massachusetts Department of Elementary and Secondary Education and an increase in the amount of Pepperell's contribution this year, Townsend's assessment for the North Middlesex Regional School District was lowered by $127,053, said Town Administrator Andy Sheehan.

Pepperell's payment was increased by $472,546 by the state because the town needed to get caught up, he said. The impact on future budgets is unclear. "They're not fully caught up. We don't know how the DESE is going to treat that," he said.

Last year, Townsend made municipal budget cuts and tapped free cash and other revenues to pay for an increase in the school budget. The town rejected three override votes to avoid the cuts.

The first override, based on a wants budget, was held on June 21. Townsend's share of the increase was $1,366,119. The override failed in all three member towns.

The second override, based on a needs budget, passed in Pepperell and Ashby but not in Townsend on Aug. 15. Because the other communities passed the override, Townsend had to find $417,727 for the schools from within the budget.

The selectmen and the town administrator came up with a series of reductions and revenue enhancements to reduce the deficit to $119,000, Sheehan said. A third override, held on Nov. 13, failed.

Personnel cuts and reductions in building operating hours were avoided by using $30,000 from free cash, $50,000 from ambulance receipts and by cutting an unfilled position to six months. Smaller savings came from line items, including legal expenses and energy, he said.

The reduction in the school budget together with the allowed 2.5 percent increase in the tax levy, $340,000, leaves room for a 2.5 percent increase for noncontract, nonunion municipal employees including stipend employees in fiscal 2014, Sheehan said.

Four positions -- the town administrator, the fire chief, the police chief and a recently reclassified position of deputy police chief -- have new contracts with raises for fiscal 2014. Contract negotiations are still ongoing with the Fire, Police, Communications and Highway departments.

Other municipal expenses will rise. The town will see an increase of $180,000 for Middlesex Retirement that funds town employee pensions, Sheehan said. He has not been able to find out if the increase is a one-time expense or if it will be ongoing. Municipal insurance payments will increase.

The town will no longer receive a credit of $40,000 per year from North Middlesex. The credit was given because of an overpayment some years past and ended in fiscal 2013.

The capital account has about $400,000 intended for payments on the Spaulding School roof. The payments are $203,500 per year for four years with a smaller payment due the fifth year, Sheehan said. Money will continue to be put into the capital account during Town Meeting to make the payments.

The budget will be on the warrant for the annual Town Meeting on May 7.