Rising Health Insurance Costs Squeeze Town Budgets for FY2026

Report on the Meeting of the Amherst Finance Finance Committee, February 4, 2025 

This meeting was held over Zoom and was recorded.

Health Insurance Cost Hike Estimated at 20% for Coming Year
After hearing that first quarter FY2025 revenues and expenditures were pretty much on target, Town Manager Paul Bockelman broke the bad news that the town’s cost for employee health insurance is estimated to rise 19.92% for FY2026, far more than the 13% budgeted. Bockelman said, “We are utilizing health insurance at a higher rate than what we’re paying to the company. Basically, they’re losing money on every member of our town and school district.” 

He said the tools for lowering the rates are limited. State law requires that we have an Employee Insurance Advisory committee made up of all the collective bargaining units and non-union employees and town staff, and that committee will be meeting to discuss the situation. The town can go out to bid for a different company, but Bockelman didn’t think that would make a significant difference because companies are going to look at our existing rate of use and price accordingly. The other option is to offer a less expensive plan with higher deductibles and copays. But even so, it is likely that health insurance costs will far exceed the budgeted amount. He said, “Hopefully, we can get the cost down a bit, but it’s going to be significant either way. We budgeted in 13% in working numbers, so the closer we can get to the 13% the better off we will be.”

He stated that health care use jumped after COVID due to deferred care, but it hasn’t gone down to pre-pandemic levels. Hospitals are incurring additional costs, and new weight-loss drugs are costing thousands of dollars a month. “This is the first time there is a high- cost drug with high usage,” Bockelman said. 

Finance Director Melissa Zawadzki estimated that the increased health insurance cost will consume most of the increased revenue from property taxes. State aid increased by 2.8%, but the actual increase, after assessments for regional transportation and charter school tuition, is less than one percent, leaving minimal funds for cost-of-living adjustments (COLA) for employees.

Finance Director Recommends Budget Increases of 3.5% for Each Department
Despite the increase in projected costs, Zawadzki thought that, with the high existing interest rates and the delays in the need to borrow for capital projects  such as the Jones Library demolition/expansion, the town could afford budget increases of 3.5%, rather than the 3% in the original projections. The 3.5% would be applied equally to the town departments, the Jones Library, the elementary schools, and the assessment for the regional schools. She said, “I think we can push the percentage of increase for next year’s budget to 3.5%. We will continue to track, and may be able to increase if there is more money from the state or local receipts. Given the political environment and what that means for the economics of the future, I’ll just say that it’s prudent for us to be safe in an unknown environment.”

Water and Sewer Services Above Budget 
Comptroller Holly Drake noted that the costs to provide water and sewer services are running over budget due to aging infrastructure. Also, it is costing $1 million more than anticipated to dispose of sewer sludge. However, she didn’t think the town would need to raise water and sewer rates mid-year and could make up the shortfall from other sources.

Cannabis tax revenue is also running below previous years. Finance Committee member Bob Hegner (District 5) noted that, at this rate, the town will only collect $50,000 this year, as opposed to $77,000 in FY2024. He asked if this was sufficient to meet the town’s obligations to the Reparations Stabilization Fund, since the amount of cannabis tax revenue is what the town agreed to add to the fund every year. Bockelman noted that not only is revenue from cannabis sales down, but host community agreements are not being enforced as much as in the past by the State Cannabis Control Commission. He said that it is something the town is tracking.

New Leadership for the Finance Committee
Cathy Schoen (District 1) was elected Chair of the Finance Committee and Bob Hegner was elected Vice Chair. Other members of the newly constituted committee are Andy Steinberg, Ellisha Walker, and Mandi Jo Hanneke (at large councilors).