MERSD FY26 Budget FAQ
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What is the total MERSD FY26 Budget?
What is the FY26 MERSD Budget?
- Total Budget: $32.6 million (7.83% increase from FY25)
- Key Revenue Sources:
- Town Assessments: $28.2 million (86.5% of total revenue)
- Essex: $10.75 million (8.65% increase)
- Manchester: $17.48 million (6.96% increase)
- State Aid (Chapter 70): $3.41 million (4.52% increase)
- School Choice Revenue: $500,000
- Reserves (E&D): $600,000
- OPEB Deferred Payment: $150,000
For More Detailed Information - FY26 MERSD Budget Book
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Why is health insurance such a big factor in the budget?
Health insurance is a significant cost driver in the FY26 MERSD budget. In FY26, the district faces a 22.95% premium increase, driven by rising premiums, growing enrollment, and increased extraordinary claims. MERSD is not alone. Many school districts and municipalities are experiencing double digit increases that are predicted to continue into next year.
Because health insurance plans are negotiated through collective bargaining, the district cannot unilaterally adjust coverage, deductibles, or provider structures. Despite exploring cost-saving alternatives, the district’s obligation to provide benefits remains a major budget challenge.
Efforts to Actively Manage Health Insurance Costs
MERSD has implemented several initiatives over the years to manage healthcare costs and keep increases manageable. These efforts have resulted in an average renewal rate increase of 5.7% over the past decade, compared to the national average of 8%. Key initiatives include:
Health Insurance Cost-Saving Initiatives Timeline
- 2010: Required Medicare Enrollment
Retirees aged 65 and older are required to enroll in Medicare, with a district-supported supplemental plan, reducing MERSD’s costs as the district is no longer the primary insurer. - 2011: Competitive Provider Bid & Provider Change
MERSD sought competitive bids for health insurance providers to ensure the best possible renewal rates, resulting in a change of provider to optimize costs and coverage. - 2012: Cost-Sharing Renegotiation
MERSD renegotiated cost-sharing splits, reducing employee contributions from 80/20 to 75/25 for existing employees and 70/30 for new employees. - 2013: Retiree Enrollment Policy Change & Competitive Provider Bid & Provider Change
A policy was implemented prohibiting retirees from adding insurance after retirement, ensuring more predictable retiree enrollment. MERSD sought competitive bids for health insurance providers, resulting in another provider change to further align with cost-saving goals. - 2015: OPEB Funding Restructure & Competitive Provider Bid & Provider Change
MERSD restructured its health insurance plan to create a funding mechanism for Other Post-Employment Benefits (OPEB). Competitive bids were sought for health insurance providers, resulting in a provider change aimed at enhancing cost efficiency and plan benefits. - 2017: Competitive Provider Bid
MERSD sought competitive bids for health insurance providers to ensure the best possible renewal rates, maintaining the existing provider. - 2019: Higher Deductible Plans & Health Reimbursement Accounts (HRAs)
New hires and retirees were moved to higher deductible plans, saving nearly 20% compared to the legacy retiree healthcare plan. Additionally, nearly 9% of retirees and all active employees began participating in HRAs, further reducing healthcare costs. - 2021: Competitive Provider Bid
MERSD sought competitive bids for health insurance providers to ensure the best possible renewal rates, resulting in continued collaboration with the existing provider. - 2025: Competitive Provider Bid
MERSD sought competitive bids for health insurance providers to ensure the best possible renewal rates.
OPEB Funding and Strategy
MERSD established an OPEB Trust Fund to manage and reduce future liabilities. As of June 30, 2024, the balance in the fund is $5,895,658. MERSD is on track to contribute $4.6 million over the next 10 years to fully fund its OPEB obligation.
Health Insurance Annual Review Process
Health insurance terms are negotiated every three years as part of the collective bargaining process with the Manchester Essex Teachers Association (META). During the interim period, the Health Insurance Advisory Committee (HIAC) oversees the renewal process to ensure competitive, cost-effective benefits.
Annual Review Process Overview:
- Contract Negotiations (Every 3 Years): Health insurance terms are negotiated as part of the META contract renewal cycle, which determines plan design, premium cost-sharing, retiree health terms, and OPEB funding.
- HIAC’s Role Between Negotiations: HIAC, a joint labor-management group, manages the health insurance renewals process. This includes:
- November to April: Reviewing claims data and assessing health plan utilization.
- Competitive Renewal Rates: Determining whether to seek competitive bids for better value.
- Additional Benefits: Reviewing dental, vision, life insurance, FSA, and 403(b) plans.
- Renewal Negotiations and Bidding: Negotiating with the current provider or seeking bids.
- Finalizing Renewal Decisions: Making final renewal decisions and preparing for open enrollment.
- Open Enrollment: Coordinating the open enrollment process and communicating benefits changes to staff and retirees.
Note: Seeking competitive bids every 3 to 5 years is standard practice in the public sector, recommended by organizations like the National Association of Insurance Commissioners (NAIC), the Government Finance Officers Association (GFOA), and the Public Entity Risk Institute (PERI).
MERSD Health Care Structure
MERSD is legally required to provide health insurance under Massachusetts General Laws (M.G.L. Chapter 32B) for eligible employees, retirees, and their dependents.
Active Employees
Retirees
- Eligibility: All part-time (20+ hours) and full-time employees.
- Plan: Tufts HMO Advantage Plan (now under Harvard Pilgrim) with a Health Reimbursement Account (HRA).
- Cost Sharing:
- 75% district / 25% employee (hired before July 1, 2015).
- 70% district / 30% employee (hired after July 1, 2015).
- Under 65: Remain on the district’s active plan.
- 65 and older: Required to enroll in Medicare with a district-supported supplemental plan.
- Cost Sharing: MERSD covers 80% of the premium for retirees enrolled before July 1, 2018. All others at the cost share rate upon retirement.
- Re-enrollment: Not permitted once coverage is discontinued.
North Shore School District Health Insurance District/Employ Cost Share Averages - January 2025 Active Employee Cost Share Retiree Cost Share DENTAL HMO Cost Share PPO/Indemnity Cost Share DENTAL HMO (Until Age 65) PPO (Until Age 65)
Medicare Supplement Retiree Medicare Supplement Survivor District % Employee % District % Employee % District % Employee % District % Employee % District % Employee % District % Employee % District % Employee % District % Employee % 35 65 74 26 70 30 21 79 70 30 70 30 75 25 73 27 0 100 70/75 30/25 70/75 30/25 0 100 70/75 30/25 70/75 30/25 70/75 30/25 0 0 No. Shore Survey Average Manchester Essex Long-Term Liability – OPEB (Retiree Health Insurance)
As of June 30, 2024, MERSD’s unfunded OPEB liability stands at $21,824,452, reflecting the district’s obligation to provide health insurance to retirees eligible for pension benefits.
- Retiree Health Insurance: MERSD covers nearly 26% more retirees (193) than active employees (154). This continues to trend upward.
- Retiree Contributions: Contributions from retirees have increased over time, from 15% in FY09 to 20-30% of the annual cost, with new hires now contributing 30%.
- 2010: Required Medicare Enrollment
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What is an override and why is one needed now?
An override allows a town to raise additional property tax revenue beyond the limits of Proposition 2½. MERSD is requesting an override for FY26 to close a $2M structural deficit caused by rising fixed costs, inflation, and 22.95% increase in healthcare premiums.
Operational Budget & Assessment Growth History Fiscal Year Operating Budget Yr-Yr Growth Rate
Operating AssessmentYr-Yr Growth Rate 2009 $17,241,803 $15,345,328 2010 $17,904,405 3.84% $16,139,810 5.18% 2011 $18,875,493 5.42% $16,785,402 4.00% 2012 $19,115,710 1.27% $16,815,635 0.18% 2013 $19,870,193 3.95% $17,236,025 2.50% 2014 $20,854,407 4.95% $17,798,747 3.26% 2015 $21,555,355 3.36% $18,422,011 3.50% 2016* $22,957,026 6.50% $20,078,169 8.99% 2017 $23,687,516 3.18% $20,743,788 3.32% 2018 $24,466,844 3.29% $21,407,006 3.20% 2019 $25,244,308 3.18% $22,111,166 3.29% 2020 $26,064,946 3.25% $22,741,698 2.85% 2021 $26,815,714 2.88% $23,464,801 3.18% 2022 $27,930,703 4.16% $24,285,535 3.50% 2023 $28,925,988 3.56% $24,987,369 2.89% 2024 $29,256,389 1.14% $25,479,028 1.97% 2025 $30,130,522 2.99% $26,229,284 2.94% Average Growth Rates 3.56% 2010-2025 3.42% Including FY16 3.36% 2010-2025 3.05% Excluding FY16 3.07% 2017-2025 3.01% Post FY16 Override *Override Year Note: Operating Budget is final budgeted amout each fiscal year MERSD has been managing a multi-year structural deficit that threatens its ability to maintain a stable, high-quality educational program. For years, we have carefully managed our operational budget to support steady, predictable growth—averaging 3.0% in spending and in town assessments since the 2017 — while sustaining level services across schools. A level services budget means we carry forward the same scope of program offerings, class sizes, and student support each year, in alignment with our Strategic Plan.
In the past years, MERSD has addressed rising costs by making internal reductions, reallocating resources, and right-sizing staffing in response to declining enrollment—down 23% since 2012. However, our ability to offset costs in these ways has been exhausted. At the same time, student needs—especially in special education—have increased, requiring additional staffing even as overall enrollment declined.
In recent years, we’ve had to make staffing reductions that go beyond enrollment-driven adjustments in order to remain within the levy limit. Despite our efforts, contractual obligations, rising fixed costs—including a 22.95% increase in healthcare premiums—and record inflation have made it impossible to sustain our 3.5% growth target. One of the tools we’ve used to manage these challenges is applying reserves to reduce the annual assessments to the towns—but those reserves are now nearly depleted.
Should the FY26 Budget not pass at the town level, we will be facing a projected shortfall of over $2 million. Without an override, we will be forced to make deep cuts to programs and staff, undermining the educational experience and putting us at a significant disadvantage in hiring for critical positions such as math, science, special education, and building-level leadership.
This would mark a serious departure from MERSD’s long-standing approach of thoughtful, stable growth and continuous improvement. Instead of focusing on innovation and long-term planning, we would be forced into a reactive, day-to-day management mode—prioritizing only basic health, safety, and compliance while making every effort to maintain instructional effectiveness.
Some impacts will be felt immediately - larger class sizes, reduced scheduling opportunities, fewer instructional supports, and increased fees. Others, like diminished professional development and increased teacher workloads, will erode program quality over time and make MERSD a less attractive place to work and learn.
An override is not just about balancing the budget; it's about preserving the quality of education our communities expect, and our students deserve.
Without an override, MERSD will be forced to implement significant program and staffing cuts, leading to larger class sizes, reduced academic offerings, and fewer student supports. The override is necessary to preserve the high-quality education the community expects. Budget growth required to sustain level services (3.5%-4%) has outpaced the 2.5% revenue growth allowed without overrides. Years of reserve use have masked this gap, and now reserves are insufficient to close it further without program cuts.
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What happens if the override fails?
Although the School Committee has adopted the budget, three critical steps remain for it to become official. The budget must be approved at both the Essex and Manchester Town Meetings, and in Essex, it will require an override ballot vote for final approval. If the budget is not approved by early June, a contingency plan will be implemented to address the $2 million shortfall between available resources and the cost of the FY26 carry-forward level services budget. This would fundamentally alter the district's direction and jeopardize the quality of education we can offer.
Approval Process & Next Steps
The FY 26 Budget has been adopted by the School Committee, but there are still key steps for it to become final:
Approval at Essex and Manchester Town Meetings:
- Manchester Town Meeting – April 28th, 6:30 PM @ Memorial Elementary School
- Essex Town Meeting – May 5th, 6:30 PM @ Essex Elementary School
In Essex, an override ballot vote will be required for final approval:
- May 12th, 7:00 AM – 8:00 PM @ Essex Public Safety Facility
What Happens If the MERSD Budget Does Not Pass?
If the proposed MERSD budget is rejected at the first round of town meetings and the override vote, the following process will take place:
Budget Review and Amendment: The Regional School District Committee will have 30 days to review, amend, and resubmit the budget based on concerns raised during the meetings and elections.
Second Round of Votes: A second round of town meetings will be held to vote on the reconsidered budget, with each town holding their meeting within 45 days of receiving the revised budget.
Final Approval: If both towns approve the reconsidered budget, it becomes final. If the reconsidered budget is rejected again, a special district-wide meeting will be held for all registered voters from both towns to vote on the budget.
State Intervention: If no budget is approved by December 1, the state takes control of the district’s finances and sets a state-imposed budget, ensuring school operations continue under a 1/12 monthly budget allocation.
Contingency Plan & Level-Funded Operations: If the budget is unresolved by June, MERSD will need to begin to enact its contingency plan. If the new fiscal year begins on July 1 without an approved budget, MERSD will operate under a level-funded assumption, maintaining current services without any new funding increases until a budget is agreed upon.
