SOUTH HADLEY — Town Administrator Lisa Wong intends to plug an unforeseen $900,000 midyear rise in health insurance costs using free cash and minimal budget cuts, but in presenting her plan last week warned that another tumultuous budgeting year is on the horizon.
Hampshire County Group Insurance Trust voted in July to raise premiums by 20% for its 73 units. The trust faced an 80% rise in pharmaceutical claims, draining the trust’s reserves of $20 million to $5 million. The popularity of weight loss drugs — GLP-1 drugs alone cost $1,500 a month for 400 covered individuals — and an increase in oncology prescriptions drove the increased financial pressure.
In a recorded staff meeting on Aug. 26, Wong said she would use $730,000 in free cash to cover a majority of the premium increase, which goes into effect on Oct. 1. Cuts to department budgets will fill the remaining gap. She said that minimal, if any, positions will be reduced as a result of the increase.
But Wong warns that more fiscal pressure is on the horizon for the town. Even after a 40% increase in health insurance this year, Wong predicts another 15% rise in health insurance next year. Additionally, as the federal government withholds state grants, the Massachusetts Legislature is discussing midyear budget cuts. Costs to run the town continue to climb and grant money is increasingly difficult to hold onto, she said.
“This is very scary,” Wong told her staff. “I know all of your love the work. You love the town. You want to do your job well, and having this in the background of everything is really disruptive. I apologize for that. But we will do what we can to get back to that stability, to fight for good services and to fight the best we can.”
Assuming all grants and state aid are constant, Wong calculates a $3.5 million level-service budget deficit for fiscal year 2027. Without any changes in new growth, she is tentatively preparing two budgets for next fiscal year in case a Proposition 2½ override vote takes place next April.
South Hadley receives $15 million in state aid each year. Even as the town last spring launched a campaign to change the state’s school funding formula to allocate more money for rural and suburban schools, Wong said now she simply hopes to hold onto what the town already has.
“If the state is suddenly loosing billions of dollars in federal funds, then it’s very likely that we will not walk away unscathed,” she continued.
A path forward
South Hadley’s Budget Task Force began meeting at the beginning of the summer to study the feasibility of a Proposition 2½ override. The group will release a report in February 2026 with its recommendation on whether an override is necessary for the town’s financial health.
The town is also experiencing stagnant growth from new developments and businesses in town.
“I know there are some other communities that are facing the exact same challenges we are and when I talked to them about how they are getting their revenue to cover their expense increase, they are having explosive new growth,” Wong said.
Revisiting new commercial corridors or residential developments through zoning changes might help increase the amount of new growth in town, Wong said.
Wong also plans to review the town’s fees, fines and interest to bolster any local revenue.
“We know that there has been a lot of attrition over the years. We know that a lot of people are doing more with less and we want to try to see how long we can weather the storm before we can get some more permanent relief,” she said.