Pembroke Faces Steep Budget Challenges for Fiscal Year 2026

Rising costs in pensions, healthcare, and insurance strain town finances

PEMBROKE, MA - September 25 - Pembroke officials are bracing for significant budget challenges in the upcoming fiscal year 2026, with rising costs in several key areas putting pressure on the town's finances.

Town Manager Bill Chenard presented a sobering financial outlook to the Select Board during their September 25 meeting, highlighting substantial increases in pension costs, healthcare expenses, and insurance premiums.

Pension costs are projected to rise by 11%, while healthcare costs are expected to increase by 8.5%. Insurance premiums are also set to climb by 6.5%.

"Anytime you go above two and a half percent on your expense side, you're eating into that allowable increase on your revenue side," Chenard explained to the board.

These increases pose a significant challenge for the town, which typically sees revenue growth of around 2.5% to 3.5% annually, including new growth.

Chenard warned that if development slows, as recent indicators suggest, revenue growth could be closer to the 2.5% mark. This scenario would leave little room for other budget priorities after accounting for the rising costs in major expense categories.

The Town Manager also noted that all but one of the town's collective bargaining agreements are up for negotiation at the end of the current fiscal year. This adds another layer of financial uncertainty as the town prepares for fiscal year 2026.

"All the unions are looking for big numbers," Chenard said, indicating that wage negotiations could further strain the budget.

On the school side, Superintendent Erin Obey is expected to begin contract negotiations with teachers' unions on October 1, potentially adding to the town's financial pressures.

Despite these challenges, Chenard emphasized the importance of maintaining the town's reserves. He cautioned against using reserve funds to balance the budget, noting the negative impact such a move could have on Pembroke's bond rating.

"There's going to be tremendous pressure to spend our reserves," Chenard said. "Just keep in mind what happens when you do spend our reserves. It is a huge hit on your bond rating."

The town manager stressed that rating agencies closely scrutinize reserve levels during bond rating calls. Pembroke has maintained a policy of preserving its reserves, a practice Chenard urged the board to continue.

In addition to these major cost increases, Chenard highlighted other budget pressures. Several staff positions are significantly below comparable salaries in other communities, necessitating adjustments.

The fiscal year 2024 closeout provided some positive news, with revenue exceeding estimates by $1.8 million and expenses coming in $1.2 million under budget. However, Chenard noted some concerning trends.

Planning Board, Conservation Commission, and Zoning Board of Appeals all missed their revenue estimates, potentially signaling a slowdown in development. This could impact future new growth figures, a key component of the town's annual revenue increase.

As the town begins its budget process for fiscal year 2026, department heads will start discussions with the Town Manager's office next week. Chenard plans to present strategies for bargaining with the unions to the Select Board in an upcoming executive session.

With negotiations looming and cost pressures mounting, the town will need to navigate carefully to maintain its financial stability and preserve its strong bond rating in the coming fiscal year.