Melrose Schools and the FY26 Budget Deficit

January 28, 2025 School Committee meeting and the beginning of budget season

This article discusses the January 28 school committee meeting. To summarize:

• FY26 will be an extremely difficult fiscal year for the Melrose public school system.

• This is driven by continued increases in costs of non-salary expenditures and contractual salary increases for staff. These increases far exceed the tax revenue of the city and the state appropriations that Melrose receives, and will lead to a significant budget deficit for the upcoming year. That is, providing level services (the same services next year as this year) will cost the city significantly more.

• To address this, the FY26 school budget that will be proposed will include approximately $4.2 million in cuts, with significant and drastic cuts made to staffing that will result in increased class sizes, may result in redistricting of some students and, at the most drastic, could potentially involve closing a school. That is, rather than providing level services, the proposed budget will be (approximately) level funded (the same funding as last year), and will mean significant cuts.

As we enter the budgeting season, very difficult choices will have to be made. This is on top of the very difficult choices made last year. Your input is valued in this process as the schools, the school committee, and the city grapple with how to balance the budget.

One Year Contract Finalization

The members of the Melrose School Committee and the Melrose Educators Union (MEU) reached agreement on a one-year contract extension to the three-year collective bargaining agreements for teachers and paraprofessionals. The agreement, which was ratified by MEU membership on January 27 and by the School Committee on January 28, 2025, will cover the period from July 1, 2025 to June 30, 2026. The current three-year contract expires at the end of June 2025.

As stated in the release, “In the face of substantial fiscal constraints for Melrose Public Schools and the city as a whole, we believe that this one-year agreement will benefit Melrose teachers and paraprofessionals while ensuring stability for our students and their families in the coming year.”

The parties agreed that teachers will receive a market adjustment to their salaries at the top step (the teachers who have been teaching the longest) and all other teachers will receive their contractual step increases (the salary increases that occur year-to-year for each teacher), and paraprofessionals will receive an increase of approximately $2,000 in the starting salary amount as well as an increase in the salary for the top step for a paraprofessional.

Chair Dorie Withey noted that “this was a collaborative process that resulted in an innovative way to keep our schools uninterrupted next year in the face of an enormous fiscal constraint.” This is big news, particularly given the sometimes contentious working relationship between teachers’ unions and school committees in our neighboring towns and shows that we are all on the same page in trying to support our district and our students through these difficult times.

In sum, Melrose teachers and school staff have foregone negotiating for a 3-year contract and instead put forth a one-year deal for the next year. And we owe them a thanks for that.

Teachers, paraprofessionals, administrators, and other staff will continue to receive step and lane increases for next year, which are contractual raises for teachers for their additional years of teaching (increasing their step) and/or and improving their post-college training level (increasing their lane).This is not an unusual or problematic issue (teachers and staff deserve these raises). It will, however, add an additional over $2-3 million to the school budget next year.

If teachers, paraprofessionals, administrators, and staff always receive step and lane increases, how has it been paid for in the past? This is a good question and the answer is that, year after year, the school committee has gone to the city council and asked for free cash (non-allocated city funding) to help close budget gaps. As we are seeing, this is not a sustainable solution, but it worked when the budget gap was “only” hundreds of thousands of dollars, or even $1 million. The gap is now multiple millions of dollars, and another solution must be found.

SEEM Collaborative

The Superintendent presented the SEEM Collaborative’s annual report for the 2023-24 school year. As noted in previous articles, SEEM is a collaborative special education program that serves 11 communities in providing services to students who require a higher level of care than can be offered in-district. This program offers additional services at a lower cost than is typical for out-of-district placements and is one way that Melrose is working to contain special education costs while providing the learning environment these students need.

The Superintendent is required to report on SEEM annually, and this report is included in the agenda packet for this meeting located online at this link.

Of note, the SEEM Collaborative’s annual tuition for FY24 per student was $51,840. This means that for every student Melrose enrolls there, the district spends $51,840. This is in comparison to the $15-$16,000 that Melrose pays per pupil for students who are not receiving special education services and who remain in district.

Let’s look at two comparisons when understanding not only the importance of Melrose being a member of SEEM, but the impact of our membership on the district’s finances.

First, SEEM programs are located primarily in member communities and allow students to be located at a facility that is fairly close to Melrose. While some leases are ending soon (see: Ripley School in Melrose) and it is unclear where the next location will be, SEEM has so far been able to provide education at a lower cost that is also close to a student’s home.

The second is looking at the comparative cost to sending a special education student to an out-of-district placement versus the SEEM Collaborative program. Tuition costs vary for out-of-district placements, depending on the type of placement needed, but the report indicates that the range of cost for comparable out-of-district sites is $88,662 - $114, 807.

Sending a student to SEEM saves the district $88,662 - $51,840 = $36,882 per student (at the low end), and

$114,807 - $51,840 = $62,967 per student (at the high end).

Currently, Melrose has budgeted approximately $1 million in SEEM Collaborative tuition, which means that approximately 19 students are receiving services through this program. Looking at the cost of fully out-of-district tuition for the FY25 academic year, Melrose has budgeted $3.7 million. There are approximately 56 out of district students (this number might be off but is close), meaning that 56 – 19 = 37 are placed in non-SEEM programs.

$3.7 million / 37 = $100,000 per student for average out-of-district tuition costs. Clearly, SEEM saves us money and provides substantial savings for the students it is able to serve.

Facilities and Finance

Budgeting documents can be found online at this link.

Federal funding potential freeze

Ken Kelley reported that, at this point, it seems as if the funding freeze should not impact any of the federal money that Melrose receives specifically for its schools. Mayor Grigoraitis added that the city itself receives federal funds and that some of these funds are used in support of school-based costs, such as a grant through the Department of Justice that comes in through the health department that has, indeed, been paused. As well, a webinar to provide information on a grant proposal for school security measures has been canceled. It is unclear and up in the air as of this writing.

ECC Revenue

ECC revenue is expected to match its Offset projection for the year, even though funds are not fully met yet (because tuition continues to be collected each month), Mr. Hartman suggested that, as the ECC is one of the district’s (important) funding sources, it would be prudent to explore ways to increase enrollment in this program, as it has decreased over the past few years. It is needed “to create as much revenue as we can.” Restructuring might be needed to make sure it is providing as much enrollment and revenue as possible.

Special Education Expense Report

There are continued, growing expenses in this area. For example, out of district tuition is $5.5 million, which is approximately $1 million above budgeted amounts for FY25, and transportation expenses are rising and expected to exceed budgeted amounts. While Melrose has started using collaborative transportation services through the SEEM program, this has provided us a small savings in some of our transportation costs, but it continues to cost the district approximately $2 million.

As noted in a previous article, out of district tuition rate continue to rise at levels that far exceed inflation, state aid amounts, and city tax revenue increases.

Circuit Breaker

Let’s take a minute to understand some of the complexity behind the state reimbursement mechanism known as Circuit Breaker. This is a state program that provides financial assistance to public school districts to offset the cost of delivering high-cost special education services to students. It is included in the Offsets revenue portion of the school budget, and is one of significant contributors to the over $6 million in Offsets that are part of the district’s budget. A previous article (dated January 6, 2025) noted that our Circuit Breaker reimbursement was $350,000 lower than expected for this year (it was budgeted at $2.3 million, but the two payments we received for this year total approximately $2 million).

The equation for determining reimbursement through this program is somewhat simple: The state will reimburse a district 75% of eligible costs above a given threshold amount. The devil is in the details!

First, the payments made to districts lag by a year, so the payments we get today (FY25) are for expenses in the 2023-2024 (FY24) academic year. Additionally, the threshold amount is quite high and in 2023-24 the threshold amount per student was $51,721. This means that Melrose pays the first $51,721of costs for an out-of-district placement, and is then reimbursed 75% of some expenses above that amount.

Recall that an out of district special education student is a student who receives specialized learning at a school outside the district. Two costs are needed to make this happen: tuition to pay for the school and transportation to get the student to and from the school. Melrose has approximately 56 out-of-district placements, at a cost of approximately $100,000 per student (on average, so SEEM students cost less, other students cost more).

56 x $100,000 = $5.6 million

Back to the threshold. The district is responsible for paying (in FY24) the first $51,721for each out-of-district special education student before the state will look at reimbursable expenses. Tuition above $51,721will be reimbursed at 75% (in FY25). This means that the district pays the first $51,721plus 25% of any tuition above $51,721. The equation is:

Cost of tuition = $51,721+ .25 x (total tuition - $51,721)

Remember that payments for Circuit Breaker lag by a year, so this year’s (FY25’s) reimbursements are based on last year’s tuition numbers.

For example, for a student attending the SEEM Collaborative, with tuition cost in FY24 of $51,840:

Cost of tuition = $51,721+ .25 x ($51,840 - $51,721)

= $51,721+ .25 x $119

= $51,721+ $29.75

= $51,750.75

This is the cost that Melrose pays for each SEEM Collaborative students for FY24.

Given that reimbursements lag by a year, and that we are getting reimbursed in FY25 for costs in FY24, we can say that we got reimbursed $29.75 this year for every SEEM student from last year. If we assume we had 19 SEEM students last year (the same number we have this year), our reimbursement is 19 x $29.75 = $565.25 this year (FY25). That’s really low.

As well, SEEM’s FY25 tuition is currently $54,360 (as listed in their FY25 budget document).

This means that this year we paid $54,360 - $29.75 = $54,330 in tuition for each SEEM student.

Total SEEM cost for FY25 (including Circuit Breaker reimbursement for FY24) = 19 x$54,330 - $565.25 = $1.03 million

Beginning in 2021, this program also began reimbursing some portion of the transportation costs. In 2023, the reimbursement was 57.76% of the eligible transportation costs. I can’t find what counts as an eligible transportation cost, but I believe it varies based on the type of transportation being provided so I don’t know how much of transportation was reimbursed. But transportation is a non-trivial expense, and Melrose, a city without buses for most of our students, pays over $2 million in transportation costs each year. That’s a lot of money.

Things get worse, so hold on! The threshold amount increases each year by something called the Foundation Inflation Index. This number can rise by as much as 4.5% each year, and from 2023-2024 the Foundation Inflation Index did increase by that amount. This means that the amount each district must pay before reimbursement begins rises each year, sometimes by over $2,000. FY25 has been particularly difficult, as the threshold numbers kept rising but the Melrose budget did not keep pace with this.

Keep in mind that SEEM students are our lowest cost out-of-district students. Tuition at non-SEEM schools can be over $100,000.

Let’s look at one out-of-district placement that has a tuition cost of $100,000. Looking at the Circuit Breaker reimbursements for FY24 for this placement:

FY24 Cost of tuition = $51,721+ .25 x (total tuition - $51,721)

Cost of tuition = $51,721+ .25 x ($100,000 - $51,721)

= $51,721+ .25 x $48,279

= $51,721+ $12,070

= $63,791

Add to this transportation costs, and we are paying quite a bit, for an outplacement school that continues to raise its tuition without a comparable increase in help from the state.

In the most recent special education report, Melrose received $2.1 million in FY25 Circuit Breaker reimbursement, which was used to offset the $5.6 million out-of-district tuition costs, leaving Melrose to come up with $3.5 million.

Why was our reimbursement this year $350,000 less than we expected (as noted in my January 6 article)? This is because the budget for the upcoming year is planned with an assumption of what our Circuit Breaker reimbursement will be for the previous year’s costs. Melrose makes these assumptions based on information given to us by the state in the winter/spring (meaning, right now). But the state budget is not finalized until the summer, and Circuit Breaker reimbursement rates and eligible expenses are not determined until the state budget is finalized. If we look at the state website listing Circuit Breaker information, currently it shows this:

We see that that threshold reimbursement rate has been set, but not the percentage of reimbursement for either tuition or transportation costs, for FY25 (that is, claims made in FY26 for services rendered in FY25). And yet, we must develop and finalize a FY26 budget that includes the best guess for what our reimbursement will be. And sometimes our best guess is off…by a significant amount.

State Senator Jason Lewis, Chair of the Education Committee, has proposed a recalculation of the Circuit Breaker formula. Hopefully that will occur soon, but an article discussing this stated that a report will be finalized in 2027, with possible action coming afterwards. In other words, the state won’t be changing things any time soon.

As reported in previous articles, the tuition for the SEEM Collabortive will increase by 9.3% for FY26, and at least one out-of-district school has stated they expect a significant increase in their tuition for next year. Given all of this, it is estimated that these additional tuition and transportation costs, along with flat state aid (from both Chapter 70 and Circuit Breaker funding) will add significantly to the FY26 costs. No specific numbers are given, but the estimate is in the hundreds of thousands of dollars to approximately $1 million.

Superintendent’s Report

Personnel Report

Superintendent Deleidi reported on hirings and resignations across the district, and was particularly happy with the hiring of teachers at the middle school.

There are currently 22 openings across the district, including a number of paraprofessionals and long-terms substitutes, as well as four teaching positions, a psychologist, and two BCBA positions (special education behavioral position).

Feedback Themes

The Superintendent reported on major themes he found in the community through his two in-person budget listening sessions and an online survey. He asked the community three questions as they pertain to the school budget:

• What do you want the schools to continue to invest in?

• What do you see that we no longer need to invest in?

• What new ideas might be worth investing in?

The Superintendent acknowledged that, knowing we are entering the next school year with a likely $4.2 million deficit, the question of new investments is not as important as what we no longer should invest in. However, of the 150 respondents (62% parents and caregivers, 32% staff, 5% community members, 1% students) who did participate and provide responses, here are the themes:

• Continue to invest in teachers and staff, such that they are supported and there is sufficient staffing levels

• Continue to invest in special education, prioritizing and/or enhancing these services

• Improve the resources and environment in the district, specifically the buildings

• Improve efficiency in budget allocation and looking to eliminate waste

• Improve resources for students, particularly supporting their wellbeing and education quality

In terms of what respondents would suggest eliminating:

• Remove any redundancy in non-essential spending and reducing unnecessary positions

• Reduce the use of outside consultants, specifically for professional development

• Reassess athletics and non-essential activities such as instrument lessons

• Eliminate administrative roles, directors, SEL director, instructional coaches, DEI specialists, a special education director that overlaps with the assistant superintendent who focuses on special education

• Reduce electives and world languages and focus on core subjects

• Cut administrative assistants or consolidate roles

Three items of note:

1. The superintendent made a point of recognizing the positive attitude, resilience, and care of the community members, who are both trying to understand the problem without blame and are offering potential solutions as we face it.

2. Of the positions suggested for elimination, many of these positions either do not exist or were already eliminated last year. For example: the instructional coaches and the SEL director were cut in last year’s budget, and there is no special education director. Assistant principals are doing the job of managing student behavior and running special education services in schools.

3. While the feedback emphasized a focus on student-facing staff over non-student-facing staff, the Superintendent pointed out that many non-student-facing staff perform essential roles, such as payroll. Simply focusing on one type of staffing over another misses what is actually needed to run a school system well.

For new investments, there was a focus on

• Improving certain special education services, such as literacy and reading programs, to provide services in-house to help reduce out-of-district placements.

• Continuing to focus on improving resources at the middle school

• Improving athletics and extra-curriculars

For those who have been reading these articles, you will recall that this year’s budget required the elimination of a number of positions across the district, and a reorganizing of some resources to try to strengthen the middle school and build a language-based program at the Hoover elementary school. Lots has already been cut. And yet we will need to cut more for next year.

The superintendent emphasized that, Melrose currently “has struggled to attract new staff members,” and “there is no fat to trim” as they prepare to create next year’s budget. The $4.2 million deficit means that, in all likelihood, in next year’s budget, “any cuts are going to hurt. It will feel like cutting into bone.” As Ms. McAndrew noted, “the next couple of months are going to be really hard” on the superintendent and the finance director as they must (must) find close to $4.2 million to cut from an already lean budget. “It is hard to think about the impacts that will come to teaching and learning and to students.”

Ms. Razi-Thomas noted that approximately 400 staff serve our almost 4,000 students. A $4.2 million deficit translates to approximately 62 teachers, and while not all cuts will be in teachers, this is a helpful way to understand the magnitude of the impending financial crisis. And yes, it is a crisis. Class sizes will increase. But it is worse than that.

The superintendent said at this point they are looking at “legal compliance” to make sure that any changes made keeps Melrose within legal requirements. (It’s never good when you are working from this point, right? The legal requirement is literally the minimum that Melrose must provide its students…), because positions will be eliminated at schools. The next step is: do we need to move students to a different elementary school (because there aren’t enough teachers left in a particular grade or because class sizes must be maximized)? Do we need to close a school (because that would eliminate significant staffing to get to a balanced budget)? While none of this is a given, redistricting of some students is a real possibility.

Superintendent Deleidi and Finance Director Ken Kelley have worked through some of the anticipated cuts already (For example, the Superintendent stated “with confidence,” that “Winthrop grade one will be 29-30 students per class.”) and they will propose these to the school committee in the upcoming weeks. He said that, “People aren’t going to like [the cuts]” that will be proposed. However, while not good, 29-30 students in a first-grade class might be better than selecting 10 students who will be redistricted out of Winthrop to another elementary school in the city. Which is also better than closing the school entirely. These are the choices being made.

Not to be dramatic, but put simply, “You’re hearing things you are not going to like,” but that is because “the next option is worse.” This is the state of school financing in Melrose.

As has been stated numerous times in previous articles, and as echoed by Mr. Hartman, “our funding structure has been hindering us” and that educating the public on both the status of our financial picture as well as the real limitations in school funding will be essential if Melrose wants to see an improvement in the school district.

Budget Deficit Summary and Budget Timeline and Overview

A quick look at the FY25 versus FY24 school budget shows that general supplies cost the district over $400,000 more than last year, and it can be assumed these increases will continue to cost more in the upcoming year.

To review what we have found so far:

FY26 Deficit = Teacher and staff salary increases + Out of district tuition increases + transportation cost increases + supplies increases.

This FY26 Deficit, as stated by the Superintendent, is expected to be approximately $4.2 million. A preliminary budget timeline was proposed for the next few months, with a Wednesday, February 5 joint meeting with the city council.

The hope is that a high-level presentation with proposed cuts can be presented to the school committee on February 11, and a budget book will be presented to the community by February 25 for further deliberations, including a discussion of fees and ECC tuitions for FY26.

This year, rather than have each school present to the school committee what they would need and like for next year, as has been done in past budget cycles, as the superintendent said, “We know what they need. They’re not going to talk about that because it would just be a waste of time.” Instead, there will be a presentation to each school on the specific cuts that will be proposed for them. And the discussion will go from there.

There will be a planned public hearing on March 25, with continued budget deliberations in early April. The expectations is a balanced budget will be finalized and voted on April 29.

Seamus Kelley remarked that, while Melrose is facing a very difficult financial situation, we are not the only district currently in this position.

• Brookline is facing a $6 million budget gap

• Amherst Regional School board reports that schools face a FY26 deficit and loss of jobs

• Sutton budget cuts lead to job cuts and reassignments

• Needham is facing financial difficulties

• Hingham presented a budget with potential cuts

While not reported at this meeting, the Stoneham school district is facing a $4.5 million deficit for next year and has already told multiple school staff across the district that they will not have a job next academic year, with more cuts expected later this school year. Cuts are also expected in paraprofessionals, secretarial staff, athletics, supplies and technology. More grimly, this budget forecast is expected to continue for at least the next 5 years as tax revenue is not keeping up with rising costs, as is seen in many districts.

The Stoneham school committee, to the surprise of the district, approved a budget that funds these deficits, however. This means that the town is expecting to put to a vote an override before the end of the school year, in the hope that FY26 will not be as dire as it is now. More on this in the upcoming weeks, but it must be noted that Stoneham has never passed an override in seven attempts, however it is also very unusual that the school committee has agreed on a budget that depends on override funding. Massachusetts cities and towns have been struggling for years with underfunded schools, and it is clear that even fiscally prudent bodies are looking for solutions that get more funding to school districts.

Ms. McAndrew suggested fluidity in the Melrose budgeting process and the importance of the public hearing and public feedback She suggested that perhaps this communication might be heard before the school committee votes to set fees and tuitions, because some of the options the school committee might be facing are as drastic as cutting middle school teams, cutting some sports, and/or cutting levels. And if these are the choices, would the public be willing to, perhaps, entertain other options (e.g. significant increases in athletic fees) in order to stave off some of those cuts. Mr. Hartman suggested providing the public with multiple options for increasing revenue and what that might mean. Public feedback is important here!

If you are interested and invested in this issue, please attend a school committee meeting, a city council meeting, and/or make your voice heard.

Wednesday, February 5 at 7pm: Joint meeting with school committee and city council

Tuesday, February 11, 7pm: School committee meeting

As stated earlier, very difficult choices will have to be made, which are in addition to the very difficult choices made last year. Your input is valued in this process.

We’re all in this together, Melrose.