Dodging deep cuts in spending, Westport First Selectman Gordon Joseloff's proposed 2011-12 municipal budget emerged mostly unscathed from the Board of Finance's review Wednesday night.

The finance board cut about $400,000 from the first selectman's $66.6 million total request, a sharp contrast with major reductions it made last year. In 2010, the board slashed approximately $3.5 million from segments of Joseloff's spending plans to reallocate money for the town's pension funds.

With those accounts fully funded this year, the board did not take such drastic action.

But the minimal cuts belie major fiscal policy decisions that still face town officials. One issue, in particular, dominated debate Wednesday: funding the Other Post-Employment Benefits (OPEB) Fund, which pays retired town employees' medical benefits.

"We have a problem, and the problem is the OPEB," said board Chairwoman Helen Garten.

The fund has a $4 million annual required contribution, but Joseloff's budget appropriates only $2.35 million.

Board member Tom Lasersohn strongly advocated immediately allocating the money to make up the $1.65 million differential.

"It's absolutely incomprehensible to me that we are digging ourselves deeper into the hole by not funding the current year's obligation to employees," he said.

Board members weighed several options for fully funding OPEB, with Ed Iannone suggesting the sale of town-owned land as a potential source of revenue.

"We've had some property that was under-utilized, and I think we need to take advantage of that," he said.

The board eventually reached consensus by adopting a sense-of-the-meeting resolution that pledges to fully fund the annual required contribution to OPEB. A new actuarial report due next month will likely direct the town to increase the recommended $4 million outlay.

Board action on OPEB funding will likely take place at a May 18 meeting when the finance panel sets the town's new property tax rate. Full funding of the OPEB account could be achieved by raising that rate alone or in tandem with other measures, such as taking money from the town's cash reserves, which currently total about $10 million.

Elsewhere in its budget review, the finance board deducted $100,000, or more than one-third of the town's contribution to the Norwalk Transit District, which runs shuttle bus services throughout Westport.

Citing high operational costs and modest ridership, board members called on the district to more effectively manage its budget.

"You need to run this more as a business," board member Kenneth Wirfel told Transit Director Bud Titsworth. "We don't feel that it is being run as a business."

Titsworth replied that he had a different view of the transit district's function.

"There's no business model here," he said. "This is a public service."

The board also cut $80,000 from the Parks and Recreation Department's budget.

Town departments, along with the Board of Education, will have the opportunity to appeal budget cuts at an April 6 restoration hearing with the finance board. After it rescinds or reduces any decreases, the board will take another, final vote on the budgets.

The Representative Town Meeting will have final approval of the municipal and education budgets when it votes during the first week of May.