Mayor Ruthanne Fuller has announced that the City may soon have additional one-time funds of about $48 million available, and she has proposed that these funds be used for a combination of one-time needs and stabilizing the City’s financing through 2032 as the City completes its plan to fully fund pension liabilities by that time.
The additional one-time funds come from these sources:
- $20.5 million from a surplus that is expected to be declared in the Assessor’s Overlay account. This surplus is due in part to Eversource withdrawing appeals it had made regarding tax payments in 2012-2020.
- $5.5 million surplus from the Appellate Tax Board Interest & Penalties Account, above the level that the Board of Assessors has determined is appropriate for that account.
- $21-$23 million in Free Cash (unrestricted funds from operations in the previous year), which is expected to be certified by early October. This is significantly higher than in more typical years due in part to higher interest income.
Stabilization Fund
The Mayor is proposing to establish an Operations Booster Stabilization Fund, funded by the the first two sources — the $20.5 + $5.5 million surpluses.
The City has approximately $600 million in unfunded liabilities for pensions and retiree health insurance, and a plan is in place to close that gap by FY2032 by increasing payments for it from the General Fund by 6.6% each year. The Mayor is proposing that this new Operations Booster Stabilization Fund will pay the equivalent of a 1.6% annual increase toward that payment, thus reducing the payments from the General Fund to a 5% annual increase. The Mayor expects that, of the General Fund payments no longer needed for the 1.6% annual increase, 70% would be used for the operational needs of the Newton Public Schools (NPS) and the remaining 30% would be used to reduce forecasted gaps in funding on the City side of the budget during those years.
The net result would allow the Mayor to increase the allocation of the City budget for NPS from a 3.5% annual increase to about 3.7% for FY2025-32. After FY2032, the liabilities for pensions and retiree health insurance would be fully funded, the Operations Booster Stabilization Fund would be depleted, and the annual increase in the allocation to NPS would return to 3.5%. According to the City’s projections, the additional funding this would yield for the NPS budget would be zero in 2023-24 school year; $462,000 in 2024-25; growing to about $5.5 million in 2031-32.
The School Committee wrote to the Newton schools community that the additional funding from the Mayor’s plans for NPS would be “modest over the next three years.” The Committee said that the expected additional funds in the 2024-25 school year (“a bit under $500,000” — apparently referring to the $462,000 in the City’s projections) would be about 0.18% of the NPS budget, and an additional $500,000 would be added in 2025-26 (apparently referring to the $977,000 in the City’s projections). The School Committee did not comment publicly on amounts in later years, which range from about $1.5 million in 2026-27 to about $5.5 million in 2031-32.
Free Cash
Regarding the $21 – $23 million expected to be available from Free Cash, the Mayor plans to use these funds in FY2024 primarily for immediate, one-time needs such as road paving, legal settlements, one-time infrastructure investments, and snow-and-ice expenses.
The Mayor does not expect any other one-time funds becoming available and plans to release this year’s Long-Range Financial Plan & Five-Year Financial Forecast in the third week of September — a bit earlier than usual.
The Mayor’s plans are subject to review and approval by the City Council.
