Free cash looking good at Budget Balancing Committee

Norwood Finance Director Jeffrey O’Neill met with the Budget Balancing Committee (BBC) to go over the Town side of the budget for fiscal year 2027 (FY27).

O’Neill started the meeting off by noting these are all estimates, and nothing is set in stone, as the state has not released its budget, and so the final numbers for Norwood’s budget aren’t actualized.

That being said, O’Neill said the Town is in a pretty good position. He said new growth has greatly helped the budget and leftover revenue, and so, for this year at least, there is enough free cash to plug the deficit. [It should be noted O’Neill did not explicitly say this, however arithmetic from free cash to the estimated deficit this year appears to check out.]

The Town has been grappling with this budget deficit – aka the Town is spending more than it’s generating – for almost three years now. The last two or three budget cycles, the Town has had enough of a windfall of free cash (up to $30 million) to plug the holes easily, but Finance Commission members, along with other budget hawks in the Town Government and bodies, have been warning that the longer you use free cash to plug the holes, the worse the wound is going to be when the adhesive bandage finally does get ripped off.

So the Town has been going back and forth with its budgets ahead of this year’s Town Meeting, where an operational override is expected to be pitched. An override is when a Town “overrides” the state’s 2.5 percent cap on property tax levy increases by municipalities. Massachusetts Gov. Maura Healey has said in an interview with WGBH a few months ago that she would consider legislation, if brought to her, that would at least change Proposition 2 ½.

Several times during past public meetings, members of Boards, particularly the Finance Commission, have been nixing programs or expenses, stating that they couldn’t justify them in the face of a looming override. In September, Town Manager Tony Mazzucco said they are looking at about $10M-$14M in budget increases over five years from the state of a potential override.

O’Neill at the BBC meeting, said free cash right now is looking very good.

“Our certified free cash for the FY26 (the current fiscal year) is $24.9 million,” he said. “I just want to reiterate that is not on top of the $29 million from the prior year. That includes leftover monies.”

O’Neill said the leftover free cash was about $11 million, and during last year’s budget season, the Town estimated that it would need about $2.3 million in free cash that it didn’t end up using due to increasing revenues from new growth, along with $7.5 million in revenue surplus.

“Our true free cash from FY2025 is $11 million, and so add that to what we had leftover, we have $24.9 million.”

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O’Neill said that new growth is one of major factors with all these leftover funds, but he said it’s impossible to plan for this. The Town can’t bet on a new Moderna-sized project going in every year, but starting with the taxes from the Norwood Hospital Project, Moderna, and FM Global, it’s been working out that way since 2023.

“You don’t want to overestimate new growth, have it come in under what you’ve estimated and then we’re scrambling to raise those funds,” he said. “But this is a good story. There has been a lot of new growth, and as we’ve said for the last few years, it’s Moderna, it’s FM Global, it is the hospital – they did pick up some growth on the work that was done there too.”

And so the structural deficit remains. O’Neill said the Town is looking better than the $7 million projected deficit stated last year, but still, a deficit of $6.5 million in a $168 million budget is nothing to sneeze at.

“Our structural deficit looking ahead,” he said. “It’s still much better than where we were this time last year, but expenditures are still outpacing revenues. That is not unique to Norwood. There is a perception out there that we are spending as fast as we can – we’re not. Expenses are going up faster than revenues.”