The Finance Committee and Chief Financial Officer (CFO) discussed Marblehead’s upcoming financial forecast for fiscal year 2026 (FY26), highlighting both positive news about free cash and concerns over rising expenses in the coming years.
Finances have been a major focus in Marblehead since the conclusion of the teachers’ strike, with much attention on the need for an override.
Finance Committee Chair Alec Goolsby, Committee member Molly Teets, and CFO Aleesha Benjamin provided an overview of the town’s finances, including revenues, expenditures, cost drivers, and free cash. They stressed that the figures presented were preliminary forecasts and not final numbers for FY26.
Benjamin outlined the largest cost drivers and revenue sources for the general fund. The biggest cost, accounting for 53% of the budget, is the salaries of civil workers. The largest revenue source, making up 80% of the town’s budget, comes from property taxes.
During the discussion on specific revenue sources, Goolsby shared some good news about local receipts.
“We’ve had actually some good news in the most recent year,” Goolsby said. “Our estimate for interest income, the actual versus estimate closing June 30, 2024, showed a $2 million gap.”
This gap will contribute a substantial amount to the free cash flow in the upcoming budget, starting with $2.2 million in free cash—$1.2 million more than the previous year.
As Benjamin explained, free cash is an undesignated general fund balance that occurs when revenues exceed estimates or spending falls short of expectations.
Teets referenced the Massachusetts Department of Revenue’s (DOR) recommendation for using free cash. “As a non-recurring revenue source, free cash should be restricted to one-time expenditures, funding capital projects, or replenishing other reserves,” Teets quoted.
Goolsby noted, “Free cash is not a long-term solution to a structural deficit.”
There had been speculation during the teachers’ strike about using free cash to fund new salaries. However, as the DOR recommends and Goolsby emphasized, free cash should not be used for recurring expenses, such as salary contracts.
Board members stressed that the community of Marblehead is mindful of how free cash is allocated. While the Finance Committee offers recommendations, the final decision on its use is made by the community at Town Meeting in May.
Rising expenses are a growing concern for Marblehead in the coming years. FY26 expenses are projected at $107.9 million, with FY28 expenses potentially reaching $117.6 million. Meanwhile, revenues are projected at $106.1 million in FY26 and $109.9 million in FY28, creating a potential deficit of $1.8 million in FY26 and $7.7 million by FY28.
Goolsby stated he does not believe the solution will come from an override and suggested there are multiple ways to address the challenge, including maximizing revenue, strategic borrowing, and creating stabilized funds.
Other key topics discussed during the presentation included out-of-district tuition and transportation costs, as well as trash collection and disposal expenses.
Out-of-district tuition and transportation costs are among the most challenging expenses for schools due to the various factors involved, according to Goolsby.
Another example is trash collection. The cost per household is currently $127 per year for both trash and recycling. However, the contract with the disposal company does not include disposal costs, which have been covered by the company. The disposal company has been losing approximately $300,000 annually due to this arrangement.
Next year, the cost of trash collection is expected to rise to around $203 per year, as the 10-year contract between the trash collector and disposal companies expired. Current disposal companies will no longer cover disposal costs.
Near the end of the presentation, Goolsby remarked, “I hope everybody is taking away that this is not a perfect science, and it’s hard to do. We just want to be as transparent as possible.”
These financial projections are subject to change, and the numbers are not final for FY26. The Finance Committee will continue to work with town departments on finalizing their budget requests through early April with the whole Town considering the budget at Town Meeting on May 5.
