At a joint meeting of the North Reading Select Board, Finance Committee and School Committee, Michael Gilberto, community administrator, and town finance staff reviewed the town's draft revenue-allocation plan for fiscal 2026 and warned that limited revenue growth and rising fixed costs — notably health insurance — will constrain both municipal and school budgets.

The financial planning team projected total available revenue of roughly $82 million for fiscal 2025 and about $83 million for fiscal 2026, an increase of about 1.6 percent. Finance staff said that after subtracting unallocated fixed costs (debt service and other statutorily fixed obligations) the remaining revenue is split roughly two-thirds to the schools and one-third to municipal departments.

Lori Agalba, the finance director who led the revenue presentation, described the four main revenue categories: property taxes (subject to Proposition 2'), state aid (including Chapter 70), local receipts (fees, excise taxes and departmental revenues) and other financing sources such as transfers from stabilization and special-revenue funds. Agalba said new growth for FY26 is budgeted at about $880,000 and is expected to decline in later years as a major development completes.

Staff projected a small, roughly $65,000 classroom-aid increase under Chapter 70 as the governor's budget baseline; that figure was treated as a conservative placeholder until the official state numbers are released. Agalba and other staff emphasized that local receipts and investment income are the least predictable revenue sources and that the town follows a conservative approach to avoid overreliance on one-time gains.

The presentation explained free cash (the state-certified portion of prior-year surplus) and its typical use for one-time items such as capital projects, snow-and-ice deficits and other nonrecurring costs. Over the previous four years staff said the town produced about $2.3 million annually in free cash on average (not including an unusual school litigation settlement that materially boosted one year's total).

Officials described the delineation between unallocated fixed costs (paid regardless of operating-budget choices) and allocated fixed costs that reduce each side's available operating revenue (for example, health insurance and retirement assessments). After those deductions, the municipal side's available operating revenue was shown at roughly $20.4 million (a 1.1 percent increase year over year), while the school side's available operating revenue rose about 1.6 percent. By contrast, staff said projected level-service expense pressure is larger: municipal level-service requests were estimated at about 3.6 percent and the school's at about 5.6 percent.

Health-insurance costs emerged as the single largest fixed-cost driver. Staff used an 8.5 percent baseline increase in health premiums for the budget projection, noting that actual renewals can vary widely; they said the town uses a participating funding arrangement (PFA) and reinsurance to smooth claims volatility and that PFA-generated surpluses have been transferred to a health-insurance stabilization account in past years. Finance staff explained the PFA model as buying a higher-deductible plan and reinsuring part of that exposure; a portion of year-end favorable claims experience has historically been set aside for future stabilization.

Staff also discussed the municipal capital-improvement stabilization fund, transfers from enterprise and special-revenue funds (including cell-tower lease receipts), and the mechanics of how those funds are used to offset particular expenses or reduce the operating burden when available. The Department of Revenue's certification process for free cash was described as the moment when prior-year surpluses become formally available for appropriation at town meeting.

Officials outlined next steps: the financial planning team will meet again in early February; staff aim to produce final budget proposals for the select board, finance committee and school committee in about a month; and any transfers of free cash or stabilization funds require appropriation at town meeting. Michael Conley, assistant superintendent for finance and operations, and Patrick Bailey, superintendent of schools, participated in the discussion about school-side impacts.

The meeting closed with a reminder that the town will hold a special town meeting on Monday, Jan. 27, at 7 p.m. to act on a zoning bylaw amendment related to accessory dwelling units; staff said the warrant will include accommodations information and urged residents to attend.

No formal votes or motions were taken at the meeting; staff presented projections, answered questions and identified budget pressures and timing for future action.