STONE HARBOR – Residents should expect to see the Borough Council struggle with another round of obstacles as the 2026 budget process gets underway: At the council’s Oct. 7 meeting Frank Dallahan, a member of the Administration and Finance Committee, said the borough faces many of the same challenges that plagued the 2025 budget process.

The problem that continues to limit budget flexibility is the close proximity of budget spending to the limits on appropriations set by a state cap. In 2025 the borough came close to having to petition the state for a cap waiver.

The borough’s problem with the appropriations cap began in earnest with the transition in 2020 from a totally volunteer fire department to one that makes use of a base of paid career firefighters. The borough is moving ahead with plans to increase the number of career firefighters and is currently engaged in a set of negotiations with the volunteer fire company over a restructuring of its role.

For two years running Stone Harbor has had significant difficulty bringing in a budget that is under the appropriation cap limit. The cap, initially enacted in 1976 and altered since, limits increases in municipal appropriations to 2.5% over the previous year’s spending, but that can be raised to 3.5% through a local ordinance.

A number of items of spending, including debt service, pension payments and others, are considered “outside” the cap. But salaries and most spending on municipal operations is limited by the cap.

In 2025 the borough moved a series of spending items outside the cap by transferring them as indirect expenses to the borough’s water and sewer utility, necessitating a new fee for utility ratepayers for the final three months of the billing year. That fee is set to become permanent.

Contributing to the expected budget problems in 2026 is an expected 40% increase in premiums for the state’s health benefit plan for local government employees. Neighboring Avalon, along with Ocean City, Middle Township, Sea Isle City and Cape May, have all left the state plan for private coverage options.

Contact the reporter, Vince Conti, at vconti@cmcherald.com.