Town budget in line for meager 1.8% growth

The Select Board has voted to send the first budget of Town Manager Katie King’s tenure to the Finance Committee with a proposed increase of 1.8% in town overall spending.

The request would raise the town budget to $264.5 million and continues the recent trend of modest proposals from the town’s executive branch. The last two Town Manager budget requests under Kate Fitzpatrick had included increases of 3.2% and 3.6%.

In crafting the budget, King and her team opted to cut back on certain areas of capital spending and protect the delivery of basic town services.

“Cities and towns have limited revenue tools in terms of our ability to identify additional revenue sources, as limited by state law,” King said at the outset of her presentation at the Jan. 27 Select Board meeting. “And, of course, our primary revenue source, the property tax, has restrictions in place under Proposition 2½.”

“Needham is better situated than many, but we’re not immune to these challenges that are happening,” she added.

The spending is effectively determined by the town’s overall revenue estimates, which project revenue to increase by $4.8 million. In its projections, the town’s finance team estimates that, relative to last year there will be a $9.1 million increase in property tax revenue but a $5.3 million decrease in leftover funds from the prior fiscal year — known as “free cash.”

The free cash total is derived from both unspent appropriations and revenues that came in higher than anticipated. The final number has to be certified by the state Department of Revenue and is not determined until late in the budget process.

The FY2026 budget included almost $21 million derived from free cash compared to this year’s estimate of $15.7 million.

A 13% increase in the town’s group health insurance premiums was another factor. That increase fueled an 8.7% overall increase in the town’s total employee benefit spending. At $21.8 million, it is the third-largest bucket of town spending, behind only the school department ($106.1 million) and the Department of Public Works ($23.2 million).

More spending on people than on things

In crafting the overall budget, King made more significant reductions in the capital budget and financial warrant articles than she did in the personnel-heavy operating budget. The capital budget was reduced by $4.4 million (33%), while spending on financial warrant articles decreased by $2.8 million (60.7%).

This will push planned capital projects further into the future and also defer maintenance on town equipment and delay purchases of new equipment and other upgrades. These are all spending items that require approval from Town Meeting.

One of the capital investments that remained was the $7 million request for the town to move forward with work on a Quiet Zone, although the $7 million is a placeholder amount pending further development of cost estimates.

These reductions allowed the operating side of the budget to be increased by 4.9% to $247.1 million, an amount that was still $2 million less than had been requested collectively by town department heads.

“All of the requests would have added value to the town and there were quite a number of them,” King said. “I really, personally think the town needs more staffing. But it’s just a matter of resources available and having to make choices.”

King accepted the $106.1 million school budget voted by the School Committee Jan. 20, a 4% increase over FY26.

The overall $247 million total will result in the possible addition of six full-time equivalent positions, all but one in the school department.

The budget now moves on to the Finance Committee, which has already been holding budget review meetings with the town’s individual departments. FinCom Chair John Connelly said the nine-member committee will begin its budget deliberations at its Feb. 4 meeting.

FinCom’s draft budget is due Feb. 22, with a final budget deadline of March 15 to determine what will be presented for Annual Town Meeting approval in May.

Seven town departments have budgets over $10 million per year*

* The combined water and sewer enterprise funds have been budgeted at $18 million, largely but not totally funded by water and sewer customer payments.

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