Marblehead’s town budget has a projected $2.5 million “structural deficit”; in other words, that’s the gap between the cost of maintaining the same level of town services and the revenue available to provide those services.
Over the years, the town has squeaked by without asking for an override, relying on “free cash” — unspent money from previous fiscal years — to balance the budget. But depending on free cash has always been an unsustainable strategy.
Now, the town’s day of reckoning is here. It will either have to raise more money or slash services.
The numbers are as follows: The budget for the current fiscal year of approximately $100 million was balanced with $10.6 million in free cash. However, in the fiscal year 2024, Marblehead’s free cash is projected to be $8.5 million, $2.1 million less than in FY23.
This decline in free cash, along with growing costs such as employee health insurance and contractual obligations like cost-of-living increases for town employees, are the main drivers of the projected deficit.
Marblehead’s current financial situation illustrates the risks of relying on a volatile source like free cash to balance the budget. Rather than counting on free cash to fund 10% of the town’s operating budget, as Marblehead has been doing, the best practice is to use free cash for one-time expenses and capital projects or to simply save it, according to Town Administrator Thatcher Kezer.
In other words, on the revenue side of the budget ledger, the line for free cash should read “zero.”
By its nature, proposing a general override of Proposition 2 1/2 will always be a controversial subject. Unlike a debt-exclusion (temporary) override, which comes off the rolls once a building or project is paid for, a general override becomes a permanent part of the tax base, meaning the town will be allowed to increase the tax levy by 2.5 percent above a new, larger number in subsequent years.
That is a significant commitment, especially at a time when many of our residents, especially those on fixed incomes, are struggling with the impact of inflation and other pressures on their household budgets.
Nonetheless, at this stage, the Current believes a “yes” vote is the right vote on Article 31, mainly because the process dictates that Town Meeting May 1 will not be the final stop for the proposal. Rather, if the override achieves a two-thirds vote at Town Meeting, the matter will land on June’s town election ballot, giving all residents — not just those able and motivated to attend Town Meeting — the final say.
A decision this consequential deserves a fuller airing, which the time between Town Meeting and the election would provide.
We would expect that time to be filled with at least one public hearing — perhaps more — where town officials could explain their long-term strategy and attempt to reassure that this extraordinary request of taxpayers will not become a regular occurrence.
In our current economic climate — which also includes Beacon Hill so awash in revenue, legislators are discussing where to cut taxes, not raise them — that may prove to be a tough sell. But the town would still benefit by having the town as a whole render the ultimate verdict, rather than having the Veterans Middle School auditorium be the only “jury box.”
We urge Town Meeting attendees to extend this important discussion by voting “yes” on Article 31.
The Current Editorial Board
The members of the Current’s editorial board are Ed Bell, who serves as chairman, and Virginia Buckingham, both members of the Current’s board of directors; Kris Olson and Will Dowd, members of the Current’s editorial staff; and Robert Peck and Joseph P. Kahn. Peck is an attorney, former chairman of Marblehead’s Finance Committee and a former Select Board member. Kahn is a retired Boston Globe journalist.