Marblehead Facing $2 Million Budget Gap: Town Administrator

MARBLEHEAD, MA — Marblehead municipal departments will be asked to shave at least an additional $2 million off their collective requests for Fiscal Year 2024 as the town braces for the impact of the "structural deficit" facing it in next year's budget.

Town Administrator Thatcher Kezer said during Wednesday night's Select Board meeting that in totaling up all the numbers for what was long-known to be the looming crisis, "we are looking to reduce the department head requests somewhere between $2 million and $2.25 million." Those reductions are in addition to level funding and some cuts that departments — including Marblehead Public Schools — already included in budget requests after Kezer sounded the alarm on the financial roadblock ahead during his Feb. 1 "State of the Town" report.

Kezer reiterated on Wednesday that all departments will be required to have a budget that meets revenue and cost projections — with decreasing reliance on "free cash" — this spring because the town cannot assume passage of a general tax override, and perhaps a second override specifically for schools, in June.

"Our goal is to develop a balanced budget balanced to the revenues that we have," he said. "Using that information to inform all of you as to what a proposed override would look like. This is critical information that is needed to have that conversation."

(Also on Patch: Marblehead Schools Chart 3-Track Course To Navigate Budget Crisis)

Kezer said he has been working through staff shortages and outdated information services to determine the exact state of a town budget that had become increasingly reliant on "free cash" — the difference between projected revenues and actual revenues — to supplement the operating budget from year to year.

"Our real objective is to define what our structural deficit is," Kezer said. "We know we have a structural deficit. What we want to do is really drill in and determine what that number really is. In that journey, looking at how we're estimating receipts and revenues. Looking at those numbers. Looking at the true costs of the services that we are providing - the services that the people of Marblehead receive and expect to receive — to really fill in the numbers and define the true costs for those services.

"It's been a bit of a slog. But we are making progress and the intent is to meet the schedule of the Finance Committee to allow department heads to create a balanced budget based on the revenues that we estimate that we have at this time."

He said that in FY 2023 the town paid for more than 10 percent of its budget through the use of this free cash. He said this is not only a bad practice, but it has also gotten to an unsustainable point with these free cash "reserves" now in decline.

"We need to get off that reliance," Kezer said. "(Free cash should be considered a) non-recurring revenue source, used for one-time capital investments, funding projects or replenishing other reserves.

"You should never count on a regular supply of free cash (to pay for operating expenses)."

Kezer said he and the Finance Committee will work to determine a "safe" free cash number to use in this year's budget, and then chart a course to progressively decrease the use of that free cash each ensuing year "until we get down to zero." He said any additional free cash this year will be rolled over into next year's free cash, which is how the account is supposed to work in the first place.

"This will ween us off the free cash wagon and put Marblehead on a more stable course going forward in building a budget," Kezer said.

Select Board Moses Grader said he wanted to begin "exploratory discussions on the overrides" with the Select Board with a public forum with residents planned for the coming weeks.

Any override must pass a town meeting vote on May 1 and then a townwide vote in June. Last year's attempt to pass a $3.1 million school supplemental budget passed at town meeting but failed by about a two-to-one margin in the town vote.

The last general tax override to pass in Marblehead was in 2005.

(Scott Souza is a Patch field editor covering Beverly, Danvers, Marblehead, Peabody, Salem and Swampscott. He can be reached at Scott.Souza@Patch.com. Twitter: @Scott_Souza.)