Kasson council previews 2026 budget as healthcare and paid-leave costs rise

City staff presented the 2026 preliminary budget and a ClearGov packet, telling council the two biggest near-term cost pressures are employee healthcare rates and a new Minnesota paid-leave payroll tax.

Staff explained they raised the conservative healthcare inflation assumption from 10% to 20% in the draft based on preliminary rate guidance and historical experience; last year’s healthcare increase had been about 12%. The staff presentation included two employee plan tiers and noted the city is self-insured, which complicates forecasting. Council members asked about timing for insurance bids and whether switching to a private vendor plan could reduce costs.

Staff also outlined Minnesota’s new paid-leave program, which was described in the packet as a 0.88% payroll tax, with the city considering splitting the contribution (estimated city share 0.44%). Staff said the state will maintain benefit processing and that quarterly reporting would be used to reconcile payments; staff is evaluating private vendor options and the potential to offset costs by eliminating the city’s short-term disability coverage.

Council discussed preliminary levy timing and the public perception risk of high preliminary tax figures, and members noted the preliminary rate can be reduced before the final levy is set. Staff encouraged council members to provide feedback before the next meeting and said engineering, capital and utility funds are not part of the levy calculation in the same way as general-fund items.

Council did not adopt a final levy or budget at the meeting; staff will return with updated numbers, potential insurance bid results and any recommended changes before the preliminary levy statement is sent to taxpayers.