DANVERS -- North Shore leaders let out a collective sigh of relief last night after Senate President Robert Travaglini predicted the state won't have to cut state aid to cities and towns to balance the budget, as it has for the past two years.

"I was encouraged because one of the first statements to come out of his mouth was support for local aid, and the need to have it level funded," Danvers Town Manager Wayne Marquis said. "Five years ago, I can't imagine we would have looked at level funding as positive. At this point, it would be positive. That would be a very good first step."

Travaglini spoke at a gathering of 30 people at Jimmy's Allenhurst on Route 114 in Danvers, organized by his good friend, Senate Majority Leader Fred Berry, D-Peabody. Berry invited mayors, city councilors, legislators and school committee members from his district, which encompasses Beverly, Salem, Danvers, Peabody and Topsfield.

On the eve of Gov. Mitt Romney's State of the State address, scheduled for 7 tonight, Travaglini echoed the governor's prediction that the state won't have to cut state aid to cities and towns next year. He even suggested the Legislature will do its best to increase local aid next year, despite a projected budget deficit of $1 billion to $1.5 billion.

"We know where we left people by the wayside," Travaglini said. "We heard your cries. We share in your pain. We're going to do something about it." Last year saw the deepest cuts to local aid in more than a decade, money that cities and towns use to pay for core services like educating their children, policing the streets, fighting fires, collecting trash, maintaining roads and more. The cuts threw city and town budgets completely out of whack, leading to layoffs in communities like Peabody and Salem. After two straight years of cuts, local leaders were understandably pleased to hear a bit of good news for a change.

"I thought it was at least optimistic," Peabody Mayor Mike Bonfanti said of Travaglini's news. "From the mayor's point of view, to at least be level funded is a step up from last year. We paid the price last year. We can't afford that again."

He was particularly impressed by Travaglini's optimistic approach, compared to the gloom and doom of last year. "At least this is some light," he said. "It looks like there's going to be more local aid for us," said Lenny O'Leary, Salem City Council president. "We're hitting the right targets, so there should be enough money for us." He said "it would be a disaster" if Salem had to sustain another local aid cut.

"I thought he was somewhat upbeat," Beverly Mayor William Scanlon said. "But clearly he did say we're not out of the woods. I think he understands the pain and grief the towns and cities have suffered. I'm looking forward to hearing what the governor has to say (tonight), and trying to put that together."

"I thought it was very encouraging, because the last news we had was the possibility of a 10 percent cut," said Roberta Knight, the Topsfield selectmen's executive secretary. She said the cuts have been especially hard on the town, which had to pass Proposition 2 1/2 overrides in each of the past two years just to maintain town services.

"Topsfield won't pass another override," added Beverly Guarino, the Topsfield town clerk.

Lest the local leaders get too giddy, Travaglini warned that the tough times are not over.

"We are not out of this yet," he said. "For anybody to be painting a rosy picture for you is inappropriate."

Before any additional money can be turned over to the cities and towns, Travaglini said the state must restore some of the money that was taken from the rainy day fund, and restore funding to accounts that sustained serious cuts during the last budget process. And that must be done without raising taxes.

But after the past two years, local leaders will take what they can get. "I think it's good news," Berry said of Travaglini's tidings. "Its not great news, but it's good news for the cities and towns."

Staff writer Shawn Regan contributed to this report.