Model A: Approve a FY26 budget with a $3,862,672 million structural deficit
To patch this structural deficit, the Town will need to find 3,862,672 million in revenue to balance the level service FY26 budget. These revenues could be from an override, one-time revenues, or cuts (Model B).
Model A is very similar to the model that was put out at the first three Joint Budget Subcommittee Listening Sessions. We originally presented the “Budget Sketch” as of January 28, 2025 and the numbers have changed slightly in the last month as our estimates were replaced with actual data. There are some minor adjustments, described below, which reflect more accurate information than we had in late January and February. A brief summary:
● Assumes a $3,862,672 structural budget deficit that needs to be made up to balance the budget. The means are an override, cuts to all departments, one-time revenues, other policy decisions (see Model B ), or other unknown, structural revenue sources. We are unaware of any other recurring funding mechanisms at the moment.
● Assumes a 2.5% Cost of Living Adjustment (COLA) for all unions that are actively bargaining (teachers, fire, police patrol, police sergeants, public works, custodial, maintenance, and library) with contracts expiring in 2025 (FY26) and all nonunion municipal and school staff.
● Assumes a “Level Service” budget for all town and school departments, which implies the same staffing levels for all departments and the same levels of service; there are no new initiatives in the FY26 proposed budget. The two exceptions are the request of a new staff member by the elected Board of Assessors and the eight restored positions in the school budget.
● Includes $1.9 million in savings from redistricting within the Account 300 Franklin Public Schools line item, including economies of scale and the reduction of 20 staff members. The schools were also able to restore eight (8) positions that were reduced in FY25 due to the school cuts after the failed override. The savings from redistricting in the town budget (Account 192 Public Property & Buildings) are not reflected in this model.
Since the failed override in June 2024, 21 of the 37 positions that were reduced in the FY25 School budget have been restored and stabilized in the FY26 budget. Furthermore, the District is well streamlined for the future and has finally stabilized from the past twenty years of significant enrollment changes in the District. By closing three old schools and redistricting, the District can finally focus on the future as they have created a new foundation for the District.
The following are revised assumptions from the January 30, 2025 Budget Model presented at the first four JBSC meetings:
● Reduced Account 300 FPS $4,662 to reflect the official vote by the Franklin School Committee on February 11, 2025 of an FY26 appropriation of $80,395,338.
● Reduced 152 Human Resources by $29,482 for the part-time administrative assistant which was a position that was not filled to date.
● Increased line items 710 and 750, the non-excluded Debt and Interest, by a combined $277,653 ($190,000 principal debt, $87,653 interest) for the official borrowing of the Fire Department Ladder Truck. We are issuing a 10-year bond of $1.9 million with an assumed interest rate at 3.5%. The Truck will arrive on St Patrick's Day and the borrowing will need to occur by June 30th. This purchase was authorized over two (2) years ago by the Town Council in February 2023. If the engine was ordered today, it would cost $2.4 million (or more) and it would be delivered in four years. Thank you to our Fire Chief and the Franklin Fire Department for having the foresight to purchase this vehicle and for having the community so well prepared!
Finance Note: The Town will get a sense of the new interest market and a new bond rating by June 30th. These will be good analytics mid year. Regarding the Town’s AAA Bond Rating: Our Bond Rating agencies evaluate passed and/or failed ballot questions. The AAA ratings cited the voter approved passage of the Community Preservation Act and the Tri County School as positives. The override failed by only 1% with a massive voter turnout. An approved override would reaffirm the Town’s bond rating strength. A reduction in the Town’s bond rating will significantly impact the interest rate we could receive when borrowing for projects such as Remington-Jefferson and the Police Station buildings. We have also been informed that Standard & Poor’s (S&P) has revised its criteria, with 20% of the evaluation now focusing on pension and OPEB liabilities, which are issues that need to be recommitted to in order to protect the bond rating and ensure our liability stays on schedule. We really should not fall behind on OPEB liabilities and we have been in order to make up the deficit. However, this is not fiscally prudent, and it is our professional recommendation that this practice should not continue.
● Reduced Account 910 Benefits by a cumulative $26,534 from the the January budget model as a result of the following changes:
○ Reduce the Norfolk County Retirement Assessment line by $155,182 since the Town received a revised FY26 Norfolk County pension assessment.
○ Reduce municipal “Health/Life Insurance” by a total of $111,563, which reflects accurate health care numbers.
○ Increase “Retired Teacher GIC Health Insurance” by $180,000 to reflect the increase in costs for our Medicare Advantage plan and current premiums of the Group Insurance Commission (GIC).
○ Increase Non-GIC Retirees health insurance by $56,211.
○ Increase Worker’s Compensation by $4,000.
● Increased Account 945 - Property & Casualty (P&C) and Liability Insurance by $59,450 to compensate for two vacant properties insurance policies that are required for Davis-Thayer and Parmenter. These will be annual increases until final decisions are made on the buildings. The P&C Line item has already increased 10% so there is less wiggle room than previous years to absorb the cost of the liability insurance.
● Increased the “Enterprise Directs” to add in $51,550 in revenue to offset the budget. The $51,550 of indirect revenue comes from the town water/sewer enterprise funds due to increased health care costs.
Model B: Everything is on the table
In this Model, any combination of decisions can be made by the community.
Both Municipal and School layoffs will occur without an override or another mechanism to structurally balance the budget for FY26 and beyond. Otherwise, the Town will face the same situation again next year.
Model B is presented to give the community a sense of how to balance the budget without an override, or a lesser override amount, which would be determined by the Town Council and School Committee at public meetings. Considerations in this model are a mix of cuts, spending reductions or one-time revenues. All of these cuts would significantly impact the level of services to the public for all school and town departments.
Some recommendations:
● Reduce Account 141 - Assessors Office by $60,231. This will eliminate the new administrative staff member that was requested by the elected Board of Assessors. Due to the budget situation, we can look at this in a future year despite the compelling case the Board made in favor of expanded ability to reclassify properties to assist in capturing current growth. We support the request of the Board of Assessors and would hope the community would as well. This reduction will affect the Board's ability to comply or effectively administer the new state schedule of property evaluation, property exemptions and abatements.
● Reduce Account 192 - Public Property & Facilities by $409,208 which reflects the assumed savings for the town budget from the redistricting. The savings from redistricting were intended to help fill those gaps that were clearly created due to the high inflation years of 2022-2023, let alone the pandemic. This reduction will continue to make it difficult to properly finance the Facilities Department. I remind the public that 80% or more of this budget is school facilities costs.
● Reduce Account 210 Police Department by $250,000. These cuts would certainly result in staff reductions and/or reduced compensation for the town officers. As the Chief has stated numerous times in his previous budget narratives and publicly, a loss in a shift of officers would affect compliance of traffic enforcement, school resource capacity and increase overtime and costs due to the limited officers we have had relative to the responsibilities of the department. The current Police staff have four more officers than in the year 2000. A reduction of four officers will bring us to the staffing levels of the year 2000.
● Reduce Account 220 Fire Department by $250,000. These cuts would certainly result in staff reductions and/or reduced compensation for the town paramedics and firefighters. As the Chief has stated numerous times in his previous budget narratives and publicly, a loss in personnel will require the reduction of the third ambulance. Please see the February 5, 2025 presentation by the Fire Department at the Town Council meeting.
● Reduce Account 300 Franklin Public School by $2,085,843, which represents 54% of the structural deficit. Account 300 Franklin Public Schools are 54% of the town budget. Another $20 million of school related expenses are located in the municipal budget. Some of the following proposed cuts in the municipal budget will affect the schools directly or indirectly, some will not.
● Reduce Account 422 - Public Works by $400,000. $260,000 of the $400,000 would be in the highway division and would include cuts to road construction and maintenance as well as sidewalk maintenance, installation and maintenance of signs and supplies for other related projects. The other cuts would spread across all other divisions and result in cuts to the grounds division including reductions in tree trimming, and field maintenance, including school grounds. Additional cuts would be made to Central Motors, the Recycling Center and the administration division. A loss this size will be a major setback to the infrastructure of the community and affect our roads, sidewalks and parks. A comprehensive list of cuts is included below as well as a 2024 Presentation to the Town Council on the backlog of infrastructure work.
● Reduce Account 610 Public Library by $50,000. The Library will still comply with state law and hit their “MAR” target with the revised figure, but we are living on the edge of the cliff toward state decertification.
After these cuts, the next step is state decertification and a strict limit on customer networking for residents through the Minuteman system. It is extremely embarrassing to be on this list. The Town dug itself out of the issue in the 2016-2018 timeframe along with the Library renovation. We have transitioned the staff and reformed the entire department and CBA over the past six years into a tremendous culture. The Nation’s first lending Library with the amazing exhibit on Ben Franklin donated books, which is the cornerstone of the Town’s entire story, should not be teetering on state decertification.
As the Library Director has recently stated, we have twelve (12) full-time staff and the Town of Natick has thirty-nine (39). This reduction could affect any staff, expenses or hours the library is open.
● Reduce various Accounts of municipal nonunion, administrative staff by $250,000 These are not dispensable positions. We truly support and believe in every single position that is currently active in the Town of Franklin. We want to be clear, if any of these reductions occur, there will be noticeable impacts on the capacity of the staff to effectively respond to the needs of the community.
● Reduce Account 910 Benefits - Other Post Employment Benefits (OPEB) by $350,000 OPEB stands for “Other Post Employee Benefits” which is a legal term for a savings account for future retiree health care obligations that is required by law. With health care costs rising at the rate they are, our future obligations will continue to rise as well.
The Town of Franklin established an OPEB policy in 2016 stating that the Town would contribute a certain amount of money each year by increasing the contribution by $50,000 each fiscal year. The Town’s actuary has praised our progress towards funding OPEB and our policy has become a statewide model for other cities and towns in Massachusetts. In FY25, per the OPEB policy, the Town had planned to contribute $850,000 ($50,000 more than FY24), but cut this number down to only $400,000 by the final FY25 budget (decrease of $450,000!)
If we had not cut the budget in FY25, we would be contributing $900,000 in FY26. Instead, we currently plan to add $50,000 to the $400,000 in FY25 and contribute
$450,000 to OPEB. This represents only 50% of the original formula!
The Town may choose to decrease the OPEB contribution by $350,000 in FY26, which would bring the contribution down to only $100,000 and then $150,000 in FY27 and so on. This would be as low as we could go without jeopardizing our bond rating and losing progress on our legal obligation. This would continue the dangerous slide of cutting our OPEB contributions to make up for current budget deficits and may affect our ability to fully fund OPEB as originally planned.
Over the past two fiscal years, the Town will have transferred $800,000 of structural OPEB contributions to the Trust Fund to the school department operating budget! This figure does not account for lost interest dividends that could have occurred for the past year-plus, in addition to the replication effect for future years.
● Use one-time funds could be used from the MECC Stabilization Fund at a staff recommendation of $400,000. The current balance is $444,251 and with this recommended reduction, it would bring the balance down to $44,251.
This is part 2 of the full memo which you can find
