As Islip Town prepares to lay off up to 10 percent of its workforce, accusations are flying over the town's financial mess.

And Supervisor Phil Nolan has become a prime target as campaign season heats up, both for town board candidates and those vying for leadership of the town workers' union.

Nolan, a Democrat, says layoffs are necessary because of a projected $10-million budget shortfall, which the town comptroller has attributed to a precipitous drop in mortgage tax revenue. But Tuesday, Councilman Steven Flotteron, a Republican running for re-election, blamed the financial crisis on recent hires and pay raises approved by Nolan and other "mismanagement."

Said Nolan: "That is so off the mark, it's beyond belief."

Islip's revenue from the mortgage tax has dropped from $26 million in 2006 to a projected $7 million this year - $3 million less than budgeted, Nolan said. The town also anticipates a $1.2-million shortfall in interest earnings.

"I'm really proud of the money I've saved," said Nolan, noting that cuts in overtime and the number of take-home vehicles and wireless plans, coupled with a reduction of about 110 workers through attrition, have achieved an estimated $15 million in annual savings.

At a news conference at Town Hall Tuesday, Flotteron pointed to a recent Newsday story about recent pay raises for five managers totaling about $41,000. He also noted the addition of a commissioner at $103,100 per year to manage the new public safety enforcement department.

"We are hiring more management and we're getting rid of workers," Flotteron said. "It's a case of penny wise, dollar foolish."

Richard Hendershot, who is running for re-election as vice president of Teamsters Local 237, also has blasted the supervisor over recent hires.

The town has hired 26 people this year to replace about a third of those who have left since Jan. 1, Nolan said. "When you lose people, you sometimes have to replace them," he said.

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He defended the new commissioner position, saying the department has increased productivity by issuing fines totaling nearly 40 percent more so far this year than last year's total.

Newsday reported Friday that Nolan had awarded five pay raises to managers, after promising last year to freeze managers' pay. Nolan said he kept his promise by declining to offer a percentage pay increase for all management, and said the five raises were the result of expanded duties or oral hiring agreements.

Flotteron asked Tuesday if Nolan had promised pay raises to any other managers. In an interview later, Nolan said he had not.