AUGUSTA — The proposed city and school budget, initially projected to cost taxpayers an additional 9.8%, is now expected to increase their tax bills by only 2.5%, following a series of changes and cuts.

The latest proposal, which City Manager Jared Mills continued to work on Wednesday in anticipation of it going to city councilors for a first of two readings Thursday, uses nearly $2 million from city funds unspent in previous years and savings from school insurance costs coming in lower than projected, combined with some additional spending cuts, to reduce the impact on property tax payers from the 9.8% increase in an earlier proposal.

Both the city and school department still need to either find additional revenue or make more cuts to fulfill the demands of city councilors who, on Tuesday, directed Mills to lessen the tax impact to 2.5%.

Mills and Superintendent Mike Tracy expressed hope they can find the needed funds to lower the tax impact of the roughly $91 million budget without cutting existing employees. Councilors requested the schools cut another $50,000 from their budget, and the city another $125,000, in addition to previously discussed cuts of $350,000 to both city and school funding to come from taxpayers.

Mills, in a proposal he gave to councilors Tuesday that would have resulted in a 2.9% tax increase, proposed to take an additional $2 million from the city’s fund balance, which contains money budgeted in previous years but not spent, to reduce the need for a tax increase. The proposal also reduced the amount of funds being carried over in the budget to pay for firefighters from $500,000 to $150,000.

Tracy also said lower than expected insurance premiums should provide more than $350,000 in savings in the school budget.

The budget proposal reflects a compromise between councilors who wanted to bring the budget down to no increase out of concern for taxpayers, especially those on fixed incomes, who cannot afford a fourth straight year of tax increases, and others who did not want to further cut education funding out of concern doing so would negatively impact the education of the city’s students.

“I believe that’s a compromise a majority of my constituents would want me to support, so I will,” Ward 2 Councilor Kevin Judkins said as Tuesday’s session wrapped up. He’d previously advocated for cutting more from the school proposal to help balance the budget.

Judkins and Ward 4 Councilor Eric Lind noted the challenge of setting a balanced budget this year was made more difficult by school officials seeking a $3.7 million, or 23.7%, increase from property taxpayers to close a funding gap caused by increases in special education costs and a miscalculation of how much fund balance the school department had leftover from last year.

They both advocated for closer auditing, which Lind said would allow for  internal controls so such mistakes can be avoided.

Muffy Witham, school board chairwoman, said the school department recently interviewed a new business manager whom they expect, with school board approval, to hire to oversee finances, starting in July.

School leaders said they delivered a responsible budget that limits expenses as best they could. To achieve that, they cut 16 staff positions and added four, netting about $1 million in savings. Many of the staff positions to be cut were already vacant and not filled.

Tracy and Witham said they hope to reduce the schools’ special education costs in the future by creating in-house programs to take students that now have to be sent out of the school system because it doesn’t have the proper programming for them.