On October 7, Mayor Ruthanne Fuller and Chief Financial Officer Maureen Lemieux presented the City’s Long-Range Financial Plan and Five-Year Financial Forecast for FY2026-2030. The Mayor outlined what she called a “comprehensive, forward looking, financially stable, and fiscally disciplined” plan designed to:
- Complete by FY2033 the full funding of past pension liabilities that were unfunded for many years
- Maintain the City’s Aaa bond rating with Moody’s
- Support “steady, predictable, and sustainable” operations for the City and Newton Public Schools (NPS)
At the same time, the Mayor warned of challenges to keep costs in line with available revenues.
Filling the gap …and facing a cliff
Revenue is expected to grow 3.5% per year over the five-year period. This is driven primarily by property-tax revenue (representing 83% of revenue) growing at a 3.8% rate while other revenues are projected to grow at an average of 2%. (The 3.8% growth in property taxes is the result of the 2.5% growth permitted under Proposition 2½ plus 1.3% due to development of properties increasing the tax base.)
The plan notes, however, that while municipal expenses are projected to grow at 3.5%, in line with revenue, the expenses for NPS are projected to grow at a rate “closer to 4.1%.”
Over the next few years, the gap between 4.1% growth in NPS expenses and 3.5% growth in revenue will be filled with transfers from the Education Stabilization Fund (ESF). After voters’ rejection of an operating override in 2023, the City created the ESF in 2024 to convert $22 million of one-time windfalls into a stream of annual funding to fill this gap for several years. (The windfalls available to fund the ESF consisted of some ARPA funding, a multi-million-dollar settlement from Eversource, and “free cash” generated by interest rates higher than expected.) The City plans to apply an additional $2 million of free cash generated this year to help fill the gap, thus extending the ESF through FY2030, when it would be depleted.
While the Mayor said, “No financial cliff looms if we operate with expenses growing at the same rate as our revenues grow,” she warned that the City would indeed face a “financial cliff” when the ESF is depleted in FY2030 — “unless NPS takes active steps during the life of the Fund to prepare for the loss of that additional funding.” Her administration is urging NPS to find ways to use the ESF more slowly, so that the use of the ESF can be extended until after FY2032, when the City will have more funding available, having fully funded its pension liability backlog. The five-year plan says that the current NPS plan to draw down the ESF “would lead to significant decreases in the NPS funding” of $2 million in FY2028 and $4.1 million in FY2030.
The plan notes two impacts of inflation:
- Inflation during particular times or in particular sectors – such as ”trash/recycling, utility costs, bus transportation, special education out-of-district tuitions, construction, and/or health insurance – may increase municipal and school expenses.
- Residents “are facing … other serious financial challenges – housing, childcare, and transportation ̶– which the City has limited financial resources to help them address.”
Choices – none easy, some controversial
Mayor Fuller highlighted the importance of balancing the City’s immediate needs with long-term financial stability. She emphasized that while Newton’s financial outlook is solid, the City will need to innovate and find efficiencies, and the City and its residents will face choices. “None of them will be easy; some may be controversial.”
To meet these challenges, the five-year plan notes the potential need to:
- “Consider the cost-saving potential of regionalization” of some municipal services such as “trash and recycling management, dispatch services, or aspects of health and human services”
- “Look for opportunities to zone for and attract businesses to Newton as that tax base is essential for our financial health” (To the extent that residential real estate continues to increase in value more than commercial real estate, a larger portion of the City’s tax burden will fall on residential owners.)
- “Consider whether an operating override to support NPS is necessary and if so, when and for how much”
See Mayor Fuller’s presentation remarks and Executive Summary and the full Long-Range Financial Plan and Five-Year Financial Forecast for FY2026-FY2030.
