The Finance Committee met on Monday and voted to establish an NPS Educational Stabilization Fund and fund it with $22 million (see NewTV video). Chief Finance Officer Maureen Lemieux presented the item to the Finance Committee and explained that the impetus to create the fund began when the City accumulated a healthy amount of Free Cash at the end of both FY2022 and FY2023 from the Eversource settlement, additional income from rising interest rates, and an overlay surplus declared by the Board of Assessors. Because Free Cash was so healthy, funds were available for additional one-time uses.
Lemieux acknowledged that the Administration previously had proposed two different stabilization funds, and both proposals were rejected. She said that it has always been the Mayor’s intention to appropriate 70% of the funds to Newton Public Schools (NPS) beyond FY2026, but the Administration cannot control what happens to those funds as it cannot bind a Council that has not yet been seated. She said they would like to set up this fund as “wide sweeping as possible” so that it would cover anything that NPS would need to fund. She reminded the committee that “the purpose of the fund shall be to provide funding for education purposes — faculty staff, initiatives programs services curriculum, and any such expenditures that relate to provision of educational services by the NPS.” She added that the Administration intends to expend the funds over five years and expects, in a budget in April, to allocate $3.9 million of these funds for NPS. Any remaining funds in the account will earn interest, and the interest will return to the account and not go back to the General Fund.
Chair Gentile reminded the committee that a two-thirds vote is required to establish the fund, and only a simple majority vote is required to put money into the fund and to take money out of the fund.
Councilor Bixby inquired about the difference between this fund and the previous iterations. Lemieux explained that for the first plan, 70% of overlay funds would be put into a stabilization fund and appropriated to the schools for use over eight years. The fund would initially yield a small amount and grow to 2032, with an infusion of funds for NPS once pensions were fully funded after 2032. She said members of the Council did not like that plan. The second plan was a debt service stabilization fund, which would take in all of the money and use it to pay down debt service, thereby freeing up money for use by NPS that would otherwise go to pay debt service. That plan also lacked support. As time passed — teachers contract settled, improved understanding of NPS’s immediate needs, and a Superintendent’s entry plan created — there is more clarity on what the school department needs, resulting in the plan to set aside $3.9 million of these funds for schools this year.
Lemieux added that the Superintendent also believes she can find efficiencies in NPS and is convinced she can find savings.
After the Committee voted unanimously to establish the fund, the Committee briefly discussed the funding. Lemieux explained how the administration arrived at the $22 million figure: $26 million was the starting point, and 70% of that is $18.2 million. Along the way, between the different initiatives that the Superintendent would like to accomplish as well as the contract negotiations, the Mayor committed to making an additional $3 million of Free Cash available to the Schools. Lemieux said, “The School Department doesn’t necessarily need that money this year, and they will figure out what to do with that.” She said that the Administration has had conversations with the School Committee and the School Department, and they will decide later on how they appropriate that Free Cash. In addition, she explained that the City has been earning about 5.5% interest over the course of this year, so she applied about nine months’ worth of interest (about $800,000), and that accounts for the $22 million requested to be put into the fund.
Last week, the Programs and Services Committee also voted to approve the establishment and funding of the fund (see NewTV video). The item will be before the City Council at its meeting on Monday, March 4.