This story has been updated.

SCOTLAND - Amid the state fiscal crisis, one of Eastern Connecticut's quaint, country towns that was incorporated about 160 years ago is facing tough choices.

Scotland, which is home to just under 2,000 residents, is facing possible insolvency by springtime. According to town officials, the Board of Selectmen is beginning to explore alternatives including bankruptcy and dissolution, which may lead to Scotland joining its almost 19 square miles of land with a neighboring town.

Scotland residents voted in June to operate on a quarter of the previous year's budget until October. However, First Selectman Dan Syme said one quarter is simply "not working." Further, Malloy’s executive order proposes to cut 70 percent from the small town's annual payment.

And the reduction has the town scrambling to find an alternative.

Though Syme said the state Democrats' announcement Wednesday to raise the state sales tax gave him hope, he is still concerned about the fate of the town.

"If we have to adhere to 25 percent of the budget, the town will be insolvent by springtime," Syme said. "We are preparing the worst-case scenario. These are our options in the event we go insolvent."

Syme declined to comment on which towns Scotland would consider joining.

Malloy went public last week with his plan to slash education state aid to towns, cutting as many as 85 towns down to zero aid. The executive order is set to go into effect in October if the state legislature does not pass a budget.

While some towns are set to get nothing, even towns like Scotland that could receive a fraction of their usual aid are being hit hard.

In the 2016-2017 fiscal year, Scotland received $1.423 million from the state. However, if Malloy's executive order becomes reality, Scotland would receive $426,900 for the 2017-2018 fiscal year.

At a Board of Selectmen meeting Wednesday, town Treasurer Cheryl LaFlamme-Miller reported the town requires an estimated $400,000 a month to operate. While raising the town’s mill rate, currently 38.68, is an option, Syme is concerned residents won't approve an increase.

"Many people in this town can't take a seven or eight mill increase," Syme said.

Miller explained if residents do not approve an increase in the property tax rate and the state does not resolve a budget in October, the town will run out of money by the end of February.

"Without an increase in the mill rate," Miller explained, "the town will have expended all of its funds."

In an opinion column to The Bulletin, state Rep. Doug Dubitsky said a town in Eastern Connecticut was "seriously considering bankruptcy, or even dissolving the town altogether, under the Governor’s municipal cuts." When asked to clarify, Dubitsky requested for the statement to be removed from the column, which was published in Wednesday's paper.

Dubitsky verified Thursday he was referring to Scotland.

"I would hate for Scotland, a town that has been in existence for over 100 years, to have no choice but to dissolve because the legislature can't get its act together," said Dubitsky, also stating his disdain for the Democrats’ most recent announcement of a possible increase in sales tax.

"There is virtually no business in Scotland, so a proposal to allow towns to benefit from sales tax doesn't help them," he said.

Miller said two lenders have approached the town on rewriting the town's debt, but Syme said the next step is a public hearing on the budget followed by a vote.