Marblehead’s looming budget challenges are part of a broader fiscal storm sweeping cities and towns across Massachusetts.
According to a report from the Massachusetts Municipal Association last month, municipalities statewide are caught between rising service costs, constrained local revenue growth and limited, slow-growing state support. That combination, the MMA warns, is weakening many cities’ and towns’ ability to absorb new costs. Marblehead is already experiencing those pressures, town officials say.
The MMA report found that municipalities are heavily dependent on property taxes and constrained by Proposition 2 1/2, which limits communities to a 2.5% levy increase plus new growth. Meanwhile, unrestricted state aid has failed to keep pace with inflation, widening the gap between rising costs and available revenue.
Over the past 10 years, municipalities across the state have held 91 general override votes, with annual totals ranging from two in fiscal year 2017 to 22 in FY2026, according to state Department of Revenue data.
Finance Director Aleesha Benjamin said the town’s situation mirrors this widespread pattern. “Our new growth is pretty stagnant at $300,000 every year. There’s really no new growth for Marblehead,” she said. “Marblehead’s property tax revenue is 80% of the revenue, so that being restricted at 2.5% [annual increase] is a major problem when we have inflation at 3% or more.” Benjamin pointed to a 14% health insurance increase, pension appropriations rising 8-9%, 3% personnel cost increases and the impending new trash contract as line-item cost shocks that illustrate the squeeze.
Those numbers add up. Benjamin said the town anticipates having roughly $2 million less in free cash available for the upcoming budget compared with last year, and that the approximate $2.2 million increase in property-tax capacity is entirely offset by that drop.
“We’re actually starting off at a deficit this fiscal year, which is the reason why I’m saying we’re going to need an override,” she said.
Free cash, a surplus from the prior fiscal year, has historically been used to plug gaps in the town’s operational budget, Benjamin noted, despite state guidance recommending it be reserved for one-time expenses such as capital improvements or building stabilization reserves. Finance Committee Chair Alec Goolsby said the town’s effort to build reserves illustrates the structural bind Marblehead is in.
“In order to build those reserves, we’re having to reduce the availability of free cash to balance the budget, which is making it harder to maintain the services being delivered,” he said.
Goolsby said town officials are exploring ways to increase revenue beyond local receipts, though options remain limited since property taxes account for the bulk of the town’s revenue.
At the same time, they’ve been scrutinizing expenses, reallocating resources where possible and working closely with the schools and other departments to ease budget pressures. Benjamin emphasized the difficulty of balancing competing needs.
“We should not be fighting between the town and the schools to compete for assets that are needed for both,” she said.
That competition, she explained, is largely driven by the state’s funding structure, which often leaves municipalities shouldering the majority of costs for both public services and education.
State support has historically been insufficient to offset local pressures. The MMA report highlights that unrestricted general government aid has lagged behind inflation for the past two decades, leaving towns like Marblehead dependent on a narrow revenue base.
UGGA has fallen roughly 25% since 2002, and Massachusetts municipalities receive just 26% of their revenue from the state — below the national average of about 31%, the report states.
“I definitely do not feel the state’s funding formula reflects the realities of what we’re going through now,” Benjamin said.
She said Marblehead’s funding challenges are worsened by 3A noncompliance, which limits access to discretionary grants, without which the town is forced to depend on local taxpayers to cover projects that might otherwise receive funding.
Benjamin emphasized that the town has not sought a general override since 2005, relying instead on the annual 2.5% property tax increase allowed under Proposition 2 1/2 for the past two decades.
“We’ve stretched it as thin as it could possibly go, and it can’t go any further without actually making real cuts — whether that means cuts to public safety, public works, teachers, health — we don’t know, but it’s going to be [real] reductions in budgets,” she said.
A general override, Benjamin said, would put Marblehead in a healthy fiscal position by creating a permanent, recurring revenue source, unlike debt exclusions that fall off once capital improvements are paid off. She projected that an override could stabilize Marblehead’s finances for at least three to five years, potentially longer, while allowing the town to rebuild reserves and properly fund capital projects.
Benjamin said the town is preparing multi-year projections that will show residents the long-term effects of either approving or rejecting an override. She said any override proposal would likely include a three-to-five-year outlook and a full public education effort to explain trade-offs.
Goolsby emphasized that no final decision has been made, but the challenges are clear.
“There’s a whole process that we still need to get through, but based on the revenue being flat, indications would suggest that it’s going to be hard without [an override],” he said.
He added that his role is not to advocate for an override but to help residents understand the town’s financial position and what those realities mean for decisions voters may face in the future.
Benjamin stressed that her department is focused on transparency and fostering community trust, encouraging residents to review public financial documents such as audits and the comprehensive financial report to better understand the town’s finances and how resources are allocated across departments and services.
