Budget Crises Hitting Towns Across the South Shore

Think your town is alone in dealing with budget issues? Think again. South Shore towns are confronting the perfect storm of inflation, state mandates, and constraints on generating revenue. Across the region, local officials are facing difficult choices as costs rise faster than budgets can keep up.

The South Shore Times dug into the issues behind this crisis and how they are playing out in towns across the South Shore.

Inflation and the “4.5% Cap”

Massachusetts’ Chapter 70 education funding formula was designed to provide predictable increases in school funding, but it caps inflation adjustments at 4.5%—far below the 7–8% inflation rates seen in recent years. That shortfall has created a $465 million funding gap annually, leaving school districts scrambling to maintain services. Without reform, towns are left to make up the difference through local revenue, a difficult task given the strict limits on property tax increases. Hanover, for example, would receive $1.8 million in additional state funding if the issue was fixed. 

“Recent high levels of inflation and cost growth have had dire impacts on operating costs for schools,” wrote Colin Jones of the Massachusetts Budget and Policy Center in a recent report. “ (Inflation) is capped at a maximum of 4.5 percent annually. This fails to reflect the reality of recent inflation.”

Proposition 2½ and Local Funding Limits

Since 1980, Proposition 2½ has restricted the amount a city or town can raise property taxes each year, capping increases at 2.5% unless voters approve an override. While this law keeps taxes in check, it also makes it difficult for towns to cover rising costs—especially in school budgets, where expenses for salaries, transportation, and special education services continue to climb. If an override fails, districts are left with few options other than cutting staff, programs, or services. 

​​"I can tell you with certainty that if we try to do a level services budget for all departments, that will absolutely not fit within Proposition 2.5," Hanover Town Manager Joseph Colangelo said in October.

End of Federal COVID-19 Relief Funds

During the pandemic, federal relief funds provided a temporary financial cushion for school districts. That money helped cover staffing, student support programs, and infrastructure improvements. But with the expiration of these funds, towns must now absorb those costs back into their regular budgets—many of which were already strained. The result? Staff layoffs, program cuts, and even potential school closures.

Rising Health Insurance Costs Add to Budget Strain

On top of these challenges, municipal health insurance costs are rising sharply. The Massachusetts Municipal Association (MMA) recently announced a 15% increase in health insurance rates for next year, forcing towns to reassess their budgets. In Cohasset, this spike is contributing to a $1.2 million shortfall for FY26, according to Town Manager Christopher Senior. 

“This is very much not common… it’s a brutal increase,” Senior told the Select Board on Feb. 4. 

With drug prices and medical inflation on the rise, towns across the South Shore are struggling to absorb the added costs while maintaining services.

Rising Costs of Special Education & Out-of-District Placements

Special education is another growing financial challenge. Under federal and state laws, Massachusetts towns are required to provide appropriate services for students with disabilities—including costly out-of-district placements when necessary. These specialized programs can cost $100,000 or more per student per year, putting significant strain on local budgets.

To help offset these expenses, the state provides reimbursement through the Special Education Circuit Breaker program, but it only covers a portion of eligible costs. Making matters worse, tuition rates for special education placements increased by 14% this year, further squeezing town budgets.

A Growing Crisis for South Shore Towns

With rising costs, state-imposed funding limits, and the loss of federal aid, South Shore communities are facing an unprecedented budget crunch. Without policy changes or new revenue sources, many towns are left with difficult decisions—reducing school staff, scaling back public services, or asking voters to approve tax increases. Here’s where some of them find themselves.

Abington is addressing a $1.1 million budget deficit for the upcoming fiscal year, primarily due to rising healthcare costs, pension obligations, and inflation. To mitigate the shortfall, officials propose selling town-owned properties, including 22 Bedford St., and establishing an enterprise fund for trash collection, transitioning to a user fee system over four years. Concurrently, the police and fire departments report record-high service calls in 2024, with Police Chief John Bonney highlighting nearly 20,000 calls and Fire Chief Jack Glynn noting approximately 4,470 calls, partly due to increased medical and mental health crisis incidents. A public seminar is scheduled for March 26 to discuss the proposed changes, with the annual town meeting set for April 7 to vote on budget measures and property sales.

Cohasset is confronting significant financial challenges, with a projected 15% increase in healthcare costs and a $1.2 million budget deficit in its public schools for fiscal year 2026. Town Manager Chris Senior highlighted the healthcare cost surge, stating, "Our healthcare costs are projected to increase by more than 15%." Police Chief William Quigley reported a 129% rise in call volume over five years, largely due to mental health incidents. In response to the school budget shortfall, Superintendent Sarah Shannon proposed measures including staff reductions and reinstating a $3,000 fee for full-day kindergarten. School Committee Chair Craig MacLellan acknowledged the potential impact, noting that some cuts may affect student-facing positions.

Duxbury is confronting a $1.7 million budget shortfall, prompting the Selectboard to propose two budget options for its Town Meeting: a balanced budget with significant cuts and a contingency budget reliant on a Proposition 2 1/2 override. The balanced budget entails layoffs in essential services, including police and fire departments, in what Selectboard member Amy MacNab described as "horrific." The town has scheduled public information sessions on February 26 and 28 to discuss the proposed override and its implications.

Hanover officials have proposed a $3.5 million Proposition 2 1/2 override for fiscal year 2026, aiming to address rising costs in areas such as pension obligations, special education, and vocational school assessments. If approved, this override would result in an average property tax increase of $911 for residential taxpayers, with approximately 63% of homeowners experiencing an increase below this average. The additional funds would allocate $3.8 million to Hanover Public Schools, as requested by the Select Board, and also preserve state certification funding for the town library. This proposal follows a previously rejected override last year, which led to service reductions and new fees. The Advisory Committee will review the budget in the coming weeks before presenting recommendations at the May 5 Annual Town Meeting, with a final voter decision on the override scheduled for May 17.

Hanson is projecting a $2.6 million budget deficit for fiscal year 2026, even with anticipated increases in tax revenue and state aid. To address this shortfall, officials are considering budget cuts and a potential override, requesting department heads to prepare for possible 10% reductions. Fire Chief Robert O'Brien has requested an override to fund four new full-time firefighter positions, citing increased call volumes and extended hospital wait times. The department is also applying for a federal SAFER grant to cover these positions for three years; the override would serve as a contingency if the grant is not secured. Select Board Chair Laura FitzGerald-Kemmett supports further discussion of the Fire Department's staffing needs in upcoming meetings.

Hingham Public Schools are proposing a $70.38 million budget for fiscal year 2026, adhering to a 3.5% growth cap as per a memorandum with the town. To meet this constraint, the district plans to reduce 15 staff positions across various levels and introduce new fees, including a $250 transportation fee for secondary students and increased parking and athletic fees. Superintendent Katie Roberts noted the difficulty of the situation, stating, "Given that we had already cut deep into our discretionary lines last year, there really wasn't further to go." The School Committee has approved the total budget figure but postponed decisions on specific staffing reductions pending further information.

Norwell officials are considering a $4.1 million Proposition 2 1/2 override to address budget shortfalls driven by rising fixed costs, particularly in health insurance and pension obligations. Town Administrator Darleen Sullivan highlighted the disparity between the town's 2.5% annual revenue growth and projected 14.28% increase in health insurance costs, stating, "We have $1.870 million additional revenues all in, and we have $2 million worth of fixed costs that have just hit us." Without the override, School Superintendent Matt Keegan warned of potential $1.8 million in cuts, affecting critical positions like an assistant special education director and additional nursing staff. The Select Board plans to finalize the override request by March 5, accompanied by public forums to inform residents about the financial situation and implications of the override.