Planning for Reading’s future: a message from the Finance Committee Chair
(7-9 minute read)
As Reading prepares for Town Meeting and critical decisions about the town’s future, Finance Committee Chair Joe Carnahan has shared a detailed letter outlining the upcoming budget, major financial considerations, and long-term planning challenges. This important message is included in the Town Meeting Warrant Report (page 31), offering Town Meeting members and residents a clear view of the financial priorities, anticipated pressures, and the careful balance required to sustain and strengthen Reading’s services and infrastructure.
Town Meeting members and residents alike are encouraged to review the letter as part of their preparation for Town Meeting, to better understand the financial factors that will shape decisions ahead - and the future of our community.
Town Meeting Members,
This is the first time I have had the privilege of summarizing the budget for my fellow Town Meeting members. Thanks to prudent planning by town staff and good guidance by my predecessors on the Finance Committee, Reading is well-positioned to fund a level-service budget for the coming year. However, there are budget challenges that we should consider now in order to remain well prepared for the future.
Last October, the Finance Committee voted to recommend the use of $5.8M of free cash to support the FY26 budget. This was subsequently increased to $6M with the final budget this spring. That is an astonishing 68% increase over the amount of free cash used to support the previous year's budget. However, this increase in the use of free cash is still only enough to fund a 3.5% increase in the town and schools' operating budgets for next year.
How is that even possible? The key word is "operating."
Despite salary increases needed to satisfy newly-renegotiated contracts and to remain competitive for non-union positions, both town and school department heads have been able to keep their total costs growing roughly in line with revenue at around 3.5%. Many departments' expense budgets have remained level despite increasing costs for supplies and external services.
However, the town budget also includes "accommodated costs" that are not part of either the town or schools' operating budgets. Many accommodated costs have been growing at unsustainable rates, including
a 30% increase in the cost of natural gas for heating town and school buildings in FY25,
a 13.6% increase in the cost of health insurance for town and school employees in FY26, and
a projected 20% increase in the cost of rubbish collection in FY27.
None of these expenses are optional: Our buildings must be heated, our trash must be picked up, and our teachers, police officers, and other public employees all need their health insurance. However, these expenses are all growing far faster than the revenues we use to pay for them.
At the end of the last fiscal year, Reading had an impressive reserve of over $19.3M in certified free cash. Thanks to conservative accounting and budgeting, Reading has regenerated an average of $5M in free cash every year over the last 10 years. This has allowed Town Meeting to support the operating budget with free cash as needed, and it has left us with a significant buffer that we can use to fund capital projects and cover unexpected costs. Still, we are reaching an unfortunate milestone: This is the first time since before the 2018 Proposition 2½ override that balancing the budget has required using more free cash than we typically regenerate. At this rate, free cash reserves will go down over time, eventually requiring us to either cut services or pass a property tax override to bring revenue back into line with expenses.
This should not be a surprise. Under Proposition 2½, towns and cities cannot raise total taxes on existing properties by more than 2.5% every year. Given how many costs grow much faster than that, it is always only a matter of time before every community must either
permit new property development that can be taxed,
pass a Proposition 2½ override to increase taxes on existing properties, or
reduce the quality of town and school services.
Reading is doing well in this regard, having only needed to pass property tax overrides in 1993, 2003, and 2018. The override that passed in 2018 was intentionally small at only $4.15M. At the time, then-Town Manager Bob LeLacheur predicted it would be enough to balance the town's budgets for between three and five years. It has now been seven years, and any possible override is several years away.
Still, in any town without large amounts of new development, all override conversations are always "when" and not "if."
In the meantime, the FY26 budget aims to control the costs that we can control. Staffing levels are nearly flat across all departments: The only additions are one half-time increase in Elder Services to fund a position that was previously funded via the ARPA grant, one half-time increase in Finance (a very small department whose functioning is critical to all other aspects of budget management), and a projected increase of one kindergarten teacher in the schools.
Likewise, most departments' non-salary expense budgets are flat. The only significant new expenses are
licenses for building security system software and other software subscriptions,
new equipment and software for parking enforcement, and
new equipment, uniforms, and training for newly-hired and newly-promoted first responders.
All of these expenses were discussed when the Finance Committee met with town department heads on March 12, and all seem clearly necessary.
On the opposite side, several departments' expense budgets dropped significantly year-over-year: The Town Clerk's office only expects to run one election in FY26, and the Forestry Division funded a large cutting of dead trees in FY25 that is not in the FY26 budget.
For the school budget, the biggest highlight is that Reading is now joining the vast majority of Massachusetts communities in offering free full-day kindergarten. This was identified as a community priority many years ago. To achieve this sustainably, funding for full-day kindergarten has gradually increased over the past five years, allowing us to reduce tuition from $4,450 in 2021 to $0 in 2025. Other than that, the school budget provides for salary increases in line with last year's newly-renegotiated contracts and otherwise includes very little change from FY25.
While this document is a summary of the budget, I should also mention the two large building projects that Town Meeting will be considering this year, the Killam School and the Reading Center for Active Living. Both projects are proposed as "debt exclusions," meaning that they would be funded by temporary tax increases outside of the normal town and school budgets. Both projects would eventually lead to small increases in future operating budgets for custodial and maintenance staff. However, neither affects the FY26 (nor likely the FY27) budget directly. Both projects have been presented to the Finance Committee multiple times with an emphasis on the decisions made to reduce the costs of both buildings and to maximize reimbursements from the Massachusetts School Building Authority for the Killam School.
Before concluding, I should acknowledge external factors that may affect future years' budgets. Reading benefits from both state and federal grants such as MassWorks grants to fund road and streetscape improvements and a federal earmark to fund the flood-prevention improvements at the Maillet, Sommes, and Morgan conservation area. All Federal funding is now uncertain, and in the future, Reading taxpayers may be forced to cover things that otherwise would have been paid for by our federal taxes. Likewise, it is hard to predict what tariffs will eventually be implemented and what the impact will be on the costs of construction materials, vehicles, and other goods that the town consumes.
For now, all we can do is what we already do: Overestimate costs, underestimate revenues, and always look for opportunities where we can "invest to save." The proposed FY26 budget continues this tradition of fiscal responsibility.
I am grateful to the whole team who put this budget together, presented it to the Finance Committee, and answered our many questions. This includes Chief Financial Officer Sharon Angstrom, Town Manager Matt Kraunelis, Superintendent Tom Milaschewski, Interim School Director of Finance and Operations Phil Littlehale, and School Committee Chair Tom Wise, as well as too many department and division heads to mention. I am likewise grateful to all of my colleagues on the Finance Committee for their detailed analysis and insightful questions, including Vice-Chair Marianne McLaughlin-Downing, Geoffrey Coram, Endri Kume, Joe McDonagh, Ed Ross, Emily Sisson, John Sullivan, and Mark Zarrow. It is a pleasure to work with this committee, and I learn something interesting every time we meet. I feel very fortunate to have this staff and this committee as we plan and prepare together for whatever the future might bring for Reading.
To conclude, the Finance Committee recommends this FY26 budget for consideration by Town Meeting.
Thank you.
Joe Carnahan, Finance Committee Chair
