HADLEY — A proposed $23.31 million fiscal year 2026 operating budget will maintain existing staffing and services at the public schools and in municipal departments, while supporting the continued transition to a town-operated Advanced Life Support ambulance.

But even with no new initiatives being created, town officials are warning the Select Board and Finance Committee of the financial challenges the town is facing, and are contemplating developing a budget that would require bringing a Proposition 2 ½ tax-cap general override to voters in the fall.

Interim Town Administrator Michael Mason told the Select Board and Finance Committee Wednesday that the recommended budget is “bare bones.”

“Ultimately, what this budget represents is a level service budget from a personnel standpoint, there’s nothing additional,” Mason said.

Joined by Finance Director Linda Sanderson in presenting the plan, Mason cautioned that the recommendation is for some jobs to be adjusted, but no new positions, added hours or new programs. Even with that and other streamlining, there is concern that the town won’t be able to make a balanced budget, as departments will be underfunded and can’t be sustained. Mason suggested a more dynamic approach to close the gap is needed that could include presenting residents with the option for an operating budget override.

Expenses have been rising faster than revenues, Mason said, and this situation needs to be confronted. “The longer that we wait, the more it’s going to hurt,” Mason said.

The recommended budget is $1.34 million, or 6.8%, higher than the approved $21.97 million budget operating this year. This budget is built through an $825,229, or 4% increase, in revenues, which are going up from $20.9 million to $21.72 million.

Money for staff and programs at Hadley Elementary School and Hopkins Academy is going up $105,643, from $7.89 million to $7.99 million, even though the schools requested a $235,000 increase. All other departments combined will see a $262,609 total increase.

But with $642,904 needed for the ambulance, and a $1.59 million shortfall, Mason and Sanderson are balancing the budget by applying $686,409 in anticipated free cash, $160,376 from the current year’s free cash, $552,904 from the stabilization account for the ambulance and $90,000 from ambulance fees collected over the past year and $95,735 from opioid settlement money.

Sanderson said the plan also entails taking a few years off from funding Other Post Employment Benefits, which had $200,000 placed in that account this year. She described this as “pausing contributions” to this liability.

Even with all the maneuvering, the budget is well short of the $24.32 million in requests, with $1.01 million in staffing and programs underfunded and an additional $1.16 million in requests from department heads that couldn’t be supported.

Sanderson said the gap between requests and money available is increasing. “What’s happening each year is that gap is growing,” Sanderson said.

And Hadley is using less free cash than last year. “This is nothing new to us, we’ve been using free cash to balance the budget for the past few years,” Sanderson said.

The $15.76 million in property taxes represents a $560,392, or 3.7% increase, above this year’s $15.2 million, but new growth is off about $100,000, Sanderson said. Rooms and meals taxes have been doing better in recent years, with a projected balance of $4.41 million, which is $151,463, or 3.6%, increase above the $4.25 million this year. There is also potential for state legislation to give Hadley the authority to increase these fees.

“That’s going be of more benefit to Hadley than many other towns because it is such a large amount,” Sanderson said.

Select Board members questioned whether the current Basic Life Service ambulance, and backup to Action EMS, and transition to Advanced Life Support, can be done.

Select Board member David J. Fill II said he wonders if the ambulance can be profitable, with increased expenses, and asked that the board dedicate a meeting to discuss how to deal with this. “I don’t see how that ever turns profitable,” Fill said.

Chairwoman Molly Keegan said uncertainty is all around, pointing to consumer confidence nationally dipping, and voters will need to be informed at annual Town Meeting in May about the challenges.

The board could also push off consideration of the new Department of Public Works headquarters that could cost in the range of $20 million.

Finance Committee member Shardool Parmar said the town needs to be philosophical about what should be cut and how to reduce expenses.

“We have to decide how we want to operate the town,” Parmar said. “If we want these nice things we have, they’re going to cost more money. Are we going to pay for them or not pay for them?”

Finance Committee member Paul Benjamin said it needs to be made clear to residents that the town may be at a crisis point after relying on free cash.

“We need to be straightforward with the voters about the position the town is in, and really let them understand what we’re up against,” Benjamin said.

Scott Merzbach can be reached at smerzbach@gazettenet.com.