Northampton County proposes $46.7M budget for FY2026, avoids tax hike but taps reserves

Northampton County Finance Director John D. Chandler delivered a comprehensive presentation on expenditures in the proposed FY2026 budget at Tuesday night’s work session.

The proposed FY2026 budget totals $46.7 million, marking an increase of $2.36 million over the FY2025 adopted budget. Key drivers of this increase include a 3% cost-of-living adjustment (COLA), a 1.5% bonus effective July 1, 2025, and a 1.5% step increase effective January 3, 2026, for County employees. These adjustments, intended to mirror anticipated state employee raises, are projected to impact the General Fund by approximately $405,000 and the Eastern Shore Regional Jail (ESRJ) by $172,000.

The County also plans to increase employer contributions to employee medical insurance in response to a projected 4.1% premium hike under The Local Choice (TLC) program, which Chandler said was significantly lower than increases other localities were reporting. Additional increases are proposed for Employee +1 and Family plans, with an estimated total cost of $90,000 across departments. Total personnel costs are expected to rise to $14.05 million.

Significant reductions are proposed in capital outlay funding, down $584,533 from FY2025, though notable equipment purchases are still recommended for EMS, Solid Waste, and Facilities. Operating expenditures across departments will increase by $737,051, bringing the total to over $9.5 million.

School funding for FY2026 is proposed at $13.63 million—a $250,000 reduction from the School Board’s initial request.

Transfers to other funds will rise to $22.1 million, supporting school debt service, public utilities, and regional services. This includes $1.9 million in school capital project funding via the 1% sales tax, as well as increased contributions for ESRJ, the Department of Social Services, and county-wide debt service.

Notable outside agency funding includes:

• $500,000 for local fire departments (up from $375,000)
• $544,716 for 911 and emergency management (up $75,232)
• $353,760 for the Eastern Shore Public Library (up $114,660)
• $93,218 for the Eastern Shore Community Services Board

Revenue enhancements stem from increased collection rate assumptions: real estate collections were raised from 97% to 98%, and personal property collections from 87% to 88%, resulting in revenue gains of $232,945 and $51,853, respectively. However, projected revenues from sales tax, transient occupancy tax (TOT), and the 1% school sales tax were reduced due to ongoing economic uncertainty. Chandler noted that sales tax revenues have been softening for over six months.

The County currently holds $30 million in reserves, earning $1.5 million annually in interest. Chandler noted that any fluctuation in interest rates could inversely affect the real estate tax rate by approximately one cent.

While no increase to the real estate tax rate is proposed, the County plans to close the FY2026 budget gap by using $607,000 from its undesignated fund balance, hoping the fall in revenues will be a short term problem.

“Next year will be a different conversation. Then we may have to make some tough decisions,” Chandler said.

As of June 30, 2024, the General Fund held a balance of $9.8 million, or 18.49% of operating expenses—well above the 10% minimum reserve requirement.

Budget challenges include rising software and equipment costs in public safety and judicial departments, expanded outside agency support, and limited new state funding. Despite these pressures, county officials are committed to preserving essential services and long-term fiscal health.

Chandler concluded that the figures will need to be “massaged” before the final budget vote in June.