EASTHAMPTON — Though the city’s looming $6.9 million Proposition 2½ override vote in less than two weeks may appear to stem from a sudden financial crisis, officials say the budget gap grew gradually over several years as rising costs outpaced revenue growth and the city increasingly relied on reserve funds to avoid cuts to services.
Over the past three fiscal years, the city has transferred nearly $7 million from reserve and stabilization accounts — including $4.5 million in the current fiscal year alone — into its operating budget to maintain services. Using reserves allowed the city to temporarily offset mounting expenses tied to health insurance, special education and out-of-district costs, debt payments and union contracts.
Now, with reserve accounts nearing depletion — the money was not replenished this year as anticipated — and costs continuing to climb faster than revenues, city leaders say voters face a pivotal decision in the June 9 override vote: accept significant cuts across municipal departments and schools, or pay for most current services at a higher expense with minimal cuts.
In an interview with the Gazette last week that included Auditor Hetal Patel, Treasurer Brooke Johnson and mayoral assistant Evan Lebeau, Mayor Salem Derby said if the city had taken a more conservative approach in recent years — making small cuts each year, mixed with using less stabilization funding — the budget deficit of $6.5 million next fiscal year would not be as deep.
“Doing those things in a more gradual way would have protected us from getting to this point because we would have been constraining growth and we would have been reserving our hard stabilization, but that is not really what happened,” said Derby, who took over on an interim basis last summer for former Mayor Nicole LaChapelle and was elected to the position full time in November.
Derby said an override of $8.5 million is more realistic to provide the city full stability.
Regardless of past spending, Derby said Easthampton would still be facing the same inflation-related budget constraints many communities face — out of 351 municipalities in the state, 57 have proposed overrides this year, as of May.
Using reserves
For the current 2026 budget, the former mayoral administration used $4 million from the city’s general stabilization fund, $400,000 from an excess overlay account and $100,000 from the tax-rate stabilization fund — for a total of $4.5 million. That left about $3 million in reserves.
Prior to the current year, $1.8 million was used from the general stabilization fund in 2025, and $600,000 was used in 2024 to cover the budget. However, Patel and Derby said those funds were replenished through free cash and other sources.
If the override fails, Derby’s proposed budget next year would use another $2.5 million from general stabilization and $186,000 from tax-rate stabilization. That would leave $500,000 in reserves, which is often used for emergencies and last-minute costs.
“That impacts our ability to have a safety net, so if something catastrophic happens that we need to figure out, we don’t have any cushion,” Derby said. “The other piece of that is it’s going to impact our credit rating, our bond rating.”
Derby said $500,000 is a dangerously low amount, but it would be a necessary measure to avoid having to make an additional $2.5 million in cuts next fiscal year.
Should the override fail, the city would move ahead with a $62 million budget that would mean the loss of more than 40 municipal full-time positions, many of which are in the school system. Should it pass, the budget of $65.3 million would avoid those deep layoffs but still mean reductions in resources and other items.
When presenting the budget last year, LaChapelle said the decision to use general stabilization funds took guidance from the state Division of Local Services. LaChapelle anticipated that the total $4.5 million used would likely be replenished through new revenues, though that did not come to fruition.
“We are shifting $4 million from our general stabilization fund into the general fund while remaining in line with our new policy targets,” LaChapelle said, presenting the fiscal year 2026 budget at the City Council’s May 7, 2025 meeting. “That sounds a little dramatic, but basically what we’re doing is that we have over-saved very purposely for a number of years to get to the point where we could basically rightsize our budget.”
Council’s role
City Councilor and Finance Committee Chair Thomas Peake said while the extent of the city’s potential deficit was not immediately apparent last year, the council knew the city had a difficult financial path ahead.
“If you actually watch through the conversations that we had over the past several years, I don’t think it’s fair to say that nobody saw it coming,” Peake said in an interview. “I think there has been awareness that the cost of doing business in the city is increasing faster than the revenues are.”
City Council President Koni Denham said she was the only councilor to vote against the 2026 budget, seeing the $4.5 million that would have been used in stabilization.
“I was the only councilor who voted against the [2026] budget in its entirety,” Denham said in an interview. “You can look at the argument that they were trying to rightsize stabilization accounts but the reality is we didn’t have the revenue to fill those gaps.”
Denham said moving forward, the council has to work more closely with the city’s auditor so it can have a deeper understanding of Easthampton’s finances.
“I’m not passing off responsibility, but I think there was a collective unwillingness to look at the reality of what we were facing coming out of COVID,” Denham said. “Some people make this argument that (the) City Council is weak and I personally don’t buy that argument. The City Council has to be willing to intervene.”
City Councilor James “JP” Kwiecinski shared similar concerns, saying the city’s funding problems were apparent when officials used $4.5 million from stabilization accounts. Kwiecinski, who has served on the council for more than 20 years, said he voted to cut legal services from $75,000 to approximately $20,000 last year when hearing that.
“Each time you listen to the mayor’s budget proposal you’re hearing how it’s a balanced budget and right around the horizon there seems to be a rosier future,” Kwiecinski said in an interview. “Well when I heard last year that there would be $4 million taken from stabilization, I raised the alarm.”
Peake and Kwiecinski said city officials discussed pursuing a smaller override several years ago rather than the current $6.9 million proposal, but ultimately decided against it for a variety of reasons.
“Sure, you could have tried one [an override] but would it have any chances of passing? Proponents obviously weighed it and said this isn’t a good idea. Why? Because you just bought a new school,” said Kwiecinski, referring to construction of Mountain View School.
Peake said the cuts now being proposed would likely have been necessary even if the city had pursued an override earlier, though they would have been spread out over time rather than implemented all at once.
“There’s a bunch of people that have said this whole thing would have been avoidable if we had done it in the past. Well the same cuts we are making now would have been the ones made in the past,” Peake said.
A year ago, Peake said there was a level of optimism from the council that some or all of the $4.5 million in reserves would be replenished through new development in the city and potential shifts in state and federal funding formulas for local communities.
“I was hopeful that we would … have avoided this. But it’s something that you don’t fully know,” Peake said, noting that communities cannot predict their state and federal funding years into the future.
Derby said there is a certain level of trust that the council has with the mayor, who generally has a more intimate view of the budget. But he feels that the previous mayoral administration could have been more collaborative while budgeting.
“There was a different approach in the prior administration, I would say the approach was less open,” Derby said.
Patel said the treasurer’s office has experienced frequent turnover over the past four years, shifting additional responsibilities onto her office. She said a seven-month vacancy before Johnson became treasurer last August contributed to the city’s budget deficit not coming into focus until March.
Derby hopes that a community budget forum scheduled for Tuesday, June 2 will give him a chance to go over the budget in detail and to give residents an opportunity to ask questions. That forum will be held at Easthampton High School at 6 p.m.
“We want people to have the most accurate, up-to-date information as we can give them because I think probably the biggest challenge for this (override) is misinformation,” Derby said. “You cannot rely on Facebook to get accurate information.”
Peake emphasized that there is not much more room to make cuts in the currently proposed budgets. At its core, he and Denham both said this override vote is a question to voters: Are they willing to pay more money to keep the same services the city has been providing?
“You have to bite the bullet and the time to do it is now, one way or another, and that’s really up to the public to decide,” Kwiecinski said. “The time to turn out is now.”
