City finance director: structural gap remains as assessments and contract costs climb

City Finance Director Brian Ailes presented an updated FY27 budget outlook to the joint Beverly City Council and School Committee meeting on March 18, describing a structural divergence between spending and revenue that requires policy choices and further refinement.

Ailes said the forecast showed employee-related costs (health care, pensions, salary steps) growing at roughly 6.6% annually compared with revenue growth of about 4.6%, producing an initial gap in the December financial forecast of roughly $3.9 million. He highlighted three significant variances since the forecast: sharp increases in the Essex North Tech assessment (per-pupil cost and enrollment changes producing a 17.4% assessment increase relative to last year), higher-than-expected school choice and charter sending tuition assessments, and a preliminary estimate that health-insurance premiums could be closer to 9% rather than the forecasted 6%.

Ailes also noted a positive revenue variance: the governor's H 2 included about $300,000 more state aid than originally modeled for Beverly and an anticipated $350,000 in ongoing new-growth tax revenue from recent utility infrastructure work. But he warned those offsets did not yet close the structural gap and that two major outstanding items remain: the retirement/pension valuation from PERAC (expected to affect the amortization schedule) and the new sanitation contract, which could materially change the degree to which trash service costs must be borne by a trash fee versus the general fund.

On benefits, Ailes said each one-percentage-point change in health-care premiums equates to about $220,000 in annual cost across city and school budgets. He said the administration is reviewing positions, tightening discretionary spending and postponing some hires, but recommended a continued line-by-line review and collaboration with school leaders to align priorities.

Next steps: Ailes will refine enrollment-driven health-premium estimates in April, await the PERAC valuation, evaluate sanitation bids and submit a proposed budget that balances city and school priorities for council consideration before the June/July adoption deadline.