City Council

City of Salem, Massachusetts “Know Your Rights Under the Open Meeting Law, M.G.L. c. 30A ss. 18-25 and City Ordinance Sections 2-2028 through 2-2033.” The City Council Committee on Administration and Finance co-posted with the Committee of the Whole met in the Council Chamber on _May 27, 2025______________ at ______6:00_______P.M. for the purpose of discussing the matters(s) listed below. Notice of this meeting was posted on ___ May 8, 2025__ at ___ 2:39 P.M.__________________ (This meeting is being recorded) ATTENDANCE A&F – Merkl (chair), Stott, Harvey & Watson-Felt. COW - Cohen, Morsillo & Jerzylo. From the city - superintendent of schools, Dr. Zrike, Elizabeth Pauley, Assistant superintendent of finance and operation, Anna Freedman, finance director, Mayor Pangallo, and Chief of staff, Lisa Peterson ABSENT WERE: A&F – Davis. COW – Hapworth, Prosniewski & Varela. SUBJECT(S) FY26 Operating Budget Meetings & Capital Improvement Plans for the following departments: __________________________ Salem Public Schools______________________________________________________________________________________ Capital Improvement Plans_________________________________________________________________________________ Merkl - The Administration and Finance Budget Committee hearings will run through mid-June, and the agendas are posted on the city calendar, which include a link to the fiscal year 2026 proposed budget, almost 700 pages, and other financial information, including the fiscal year 2026 budget, in brief, which is always really helpful. It's an overview of budget priorities, timelines, breakdown of revenue sources, and where your money goes. These budget hearings are a great opportunity to learn about what each of our departments are doing and their vision for their department moving forward, and if any of the public has any questions regarding the Budget hearings, please feel free to email me at amerkl@salem.com. And, as always, I want to thank Anna Freedman, our finance director, and the city's finance team for all their hard work on the proposed budget and their fiscally responsible leadership. And for reference, the budget overview for the schools is in the front section of the budget book, the larger Tab 4. And we're going to start with a presentation tonight, and we will be going through the budget first and after we vote on the budget, we will discuss the CIPs looking at the five-year capital plan. Presentation: Zrike - First, I would like mention that our art show is currently at Old Town Hall, so if you have a chance, you should check it out. I will go through a few slides and Elizabeth (Pauley) will go through the particulars. This year’s budget was a difficult one as we expected. Most school district in MA are having the budget difficulties. Part of that is due to the new contract with our educators which we are happy with, and it gives them a much more competitive salary. We talked to our stakeholders, administrators and educators while determining the final budget. Our core values are Belonging, Equity and Opportunity. Our budget proposal is for $78,173,061 which is an increase of 4.8%. There was a $4.9 million gap which is partly due to the new contract. We needed our teacher salaries to be more competitive because we were losing staff and retention is very important to us. Also, all the federal funding from the pandemic had expired; we had to spend it by last summer. And as you know, expenses are rising everywhere, for us that was some of our out of district tuition, tuition for special education students who receive services. Transportation costs have gone way up for in district as well as homeless transportation. Utility costs have increased. We had to make 57 position reductions in this budget which was very difficult, but we looked at existing vacancies and retirements to make as little an impact as possible. We met with many different groups, including the public, school administrators, students, etc. We were told not to cut the pre-K and K programs. We were also told that the early college and CTE programs are very important. We preserve class sizes in Salem. The school committee felt strongly that they did not want to institute any fees, whether for sports, technology, transportation, etc. We are also transitioning from Saltonstall to Collins next year, we are transitioning the teachers and about 140 students. We will have media specialists in all libraries except Carlton next year instead of paraprofessionals. We increased the stipend for athletic coaches in the proposed budget. Pauley – We start working on our budget in October when the state has the official student counts. Since we have contract in place for most of the staff, we can start working on the budget and we are able to project our personnel costs. We begin to work with the schools and departments to see how the year is going and what the priorities are for the next year. We work with the principals and department heads. We also begin to gather community input. In March and April, we begin to work with the school committee’s finance subcommittee to develop a budget proposal. Our official presentation to the school committee is in April. We are required by law to have a formal budget hearing and then the school committee votes at the end of April. The one thing that we did this year, to reduce our costs, was to invest $1M++ in making our building more energy efficient. We think becoming more energy efficient will reduce electricity costs in the future. We looked at staffing to see if there was a job or 2 that could be combined. Our enrollment has increased by about 2% which in turn increases our Chapter 70 state funding. We have almost 4,000 students in Salem Public Schools in 2024-2025 school year. Our budget does not include the cost of employee health insurance which are included on the city side of the budget. This year we are proposing to reduce transportation costs by going from 13 big buses to 12 big buses. We believe that we can better track ridership by removing kids that aren’t using the bus and work our way through the waitlists we expect at the high school and middle school and therefore save money. The overall cost of transportation will increase because we have seen an increase in the number of homeless students and the state funding that we were receiving is ending. There will be a cost increase for those out of district placements of students with special needs that are best served in another district, but we have increased our programs for those students so less students will need to be placed out of district. 76% of our budget is personnel and 24% is non-personnel. Our budget does not include the potential loss of federal money. We didn’t know how to predict for that. We will be using grants to fund some of the salaries as well as tuition pre-payment and revolving revenue to save money in next year’s budget. Discussion: Cohen – I am disappointed that Collins and Saltonstall schools aren’t getting the benefit of the solar panels because those are leases whereas the ones at Bentley and Witchcraft are owned, so we get 100% of the benefit of having solar panels at those schools. So, I am encouraging that the next time you put solar panels on a school building avoid a program that only benefits the company that is installing them. Also, gas went up 10% and it is probably going to go up a lot more, so the faster we convert to heat pumps it’s not only going to save money, but they are healthier. The senate budget was approved, and Chapter 70 funding will increase for the schools. Will Salem benefit from that? I would also like to commend you, your staff and the school committee on negotiating a tremendous contract that will benefit Salem, students, and families for years. Salem will have a higher retention of teachers and continue to have high level quality of teachers too. Freedman – Salem receives Chapter 70 Foundation aid so that would not change with the senate budget but there is a bill that the Governor could sign that may benefit Salem but not until FY27. Stott – I appreciate thorough public process and the input that was taken in creating this budget. With the middle school student transferring from Saltonstall to Collins, do you anticipate any savings from that and what will happen with the extra space at Salts? Zrike – We don’t anticipate any savings next year, but the school committee has been transparent about the possibility of some consolidation of buildings which might mean closing one and that would be a significant savings. There will be extra space at Saltonstall and there is extra space at Witchcraft Heights. There is also extra space and Horace Mann that has been leased out for the head start pathways program. The school committee will have a retreat on June 21st where they will be discussing this, and they have asked that we pull all the leases that we have right now for outside organizations that utilize the space in our buildings. I don’t think will see any savings next year but could have some in the future depending on what the school committee decides to do with the extra space. Stott – I am also very excited about the new high school building project. You mentioned the utilities the high school but not any specifics. Isn’t it using about a 1/3 or 1/4 of the cost of utilities in the city? And regarding the reductions in staff, you mentioned the vacant and retiring staff that won’t be replaced which at first glance is positive but just because there isn’t a person associated with hat position, is there a concern that you will need some of those positions to be filled? Zrike – Yes, the utilities at the high school are very high. The reduction in staff is necessary and I would like to have more staff but where we are planning to lose people will not impact the direction of the school district or the success of the students. If we have another budget year like this one, then that worries me. Although we have had an increase in students at the high school level, enrollment in the other schools is down for the last 10 years and we added some staff during the pandemic because of the federal funding which have now been cut because that funding went away. The staffing was never right sized back when the enrollment went down so I am not concerned for this year, but if we continue to have budget deficits year after year, then yes, it will be a problem. Watson-Felt – You mentioned paying ahead for the special education costs. Is that a cascading plan or do we now face a larger jump next year for fiscal 27? Pauley – It is a common practice that we have. This is my 3rd year working on the budget and we have done it every year as well as for some years before that. I would also like to correct something that I said earlier. We have 31 special education programs and that is on page 59 of the budget book. Watson-Felt – is there a list of what positions will be cut? Pauley – There is on page 29-30 of the budget book and the header is “position reductions” but the chart doesn’t say which positions are vacant and which ones are retiring positions. Watson-felt - Is it safe to say that no one has lost a job from SPS? Zrike – We had several positions that weren’t properly certified, and they can get a waiver for that but if they are on a waiver, they are not guaranteed a position next year. It is safe to say that no professional status educator who is in good standing is walking away from SPS. Morsillo – How often do you go out to bid for the transportation service? Pauley – We have had our contract with NRT for 5 years and next years will be the last year, so we will have to go out to bid in FY26. We have a separate contract for our homeless students, and I think that is a 2-year contract so we will need to go out to bid for that in FY26 too. Our out of district special education transportation is part of a collaborative with Seam which is a regional contract. That went out to bid last year and it hadn’t gone out to bid in 10 years, so we saw an increase for that, and I think the new contract is 5 years. Morsillo – For the regular transportation, is there a lot of competition in that space? Zrike – Unfortunately, no. I am glad we aren’t running our own transportation in Salem because it is really hard for districts to do. Morsillo – So will that be part of the discussion when the school committee talks about the utilization of school in June? Zrike – Yes. They are first going to look at the size and use of each school and then they will discuss school of choice and interdistrict choice. The cost of transportation because of that is huge but on the flip side, we have some of the most diverse schools in the state because of it. I think that makes for the best schools when you have that level of diversity. So, we will have to study that very carefully.