Mayor Fuller presents FY2026 Budget as “responsible, realistic” and prioritizing NPS

On April 22, Mayor Ruthanne Fuller and Chief Financial Officer Maureen Lemieux presented a $623 million City budget for FY2026 to the City Council. 

In her address, Mayor Fuller spoke about several hot-button issues related to the budgeting process, including funding for the Newton Public Schools (NPS) and government retiree liabilities, such as the City’s pension fund.

“As Mayor, I have worked in challenging economic circumstances to provide for the needs of our residents, students, and businesses,” she said. “Simultaneously, I have taken seriously my responsibility as the steward of the City of Newton’s financial health.”

“A precarious moment”

Mayor Fuller said that her proposed $623 million budget was coming at a “precarious moment.”

“Cold economic winds are blowing in, for the City, our school district, our residents, and our businesses,” she said, referencing the uncertainty of the economic future. She attributed this uncertainty to a number of factors, including rising costs, fears of higher inflation and unemployment rates, and future unknown actions by the Trump Administration.

However, Mayor Fuller said that the City “knows how to budget, and manage, in the face of challenges.”

She said that the City has attained the highest bond rating possible (Aaa) from the credit rating agency Moody’s, which she said is important for a number of factors:

• It provides the lowest possible borrowing costs, saving taxpayers money; 
• It provides better access to funding if the economy “freezes up;” and 
• It keeps the City “on the straight and narrow” financially, avoiding poor uses of one-time funds or ignoring long-term liabilities.

“With this backdrop …and with an eye to the future, the budget I am proposing is responsible and realistic,” she said.

Balancing the budget

Mayor Fuller said that her proposed budget is balanced in two respects: first, by state law, Newton is forbidden from having a budget deficit, so revenues match expenses. 

Second, she said that she worked to balance the “immediate needs of our students with the immediate programs and services our entire community needs,” while balancing “overall immediate needs with longer-term investments in capital assets and unfunded retiree obligations,” which she said the City ignored for “way too long.”

Lemieux: Free cash and pensions

Chief Financial Officer Maureen Lemieux spoke about the importance of balancing the City budget carefully, ensuring that Newton adheres to the best possible practices with regard to Free Cash (“the combination of actual revenues in excess of revenue budget”). She said that according to the Massachusetts Department of Local Services, “under sound financial policies, a community strives to generate Free Cash in an amount equal to five to seven percent of its annual budget.”

Lemieux said that between FY2013 and FY2021, Newton’s Free Cash levels had been consistently between 2.5% to 3% each year, amounting to a total of only between 2.5% and 3% of the City budget. 

She noted that there had been a discrepancy over three previous years with regard to Free Cash, as the City saw Free Cash levels of $28.8 million, $27.9 million, and $23.6 million in FY2022, FY2023, and FY2024, respectively, due to unusual circumstances. 

Lemieux said that these high figures were largely due to payments by Eversource of “decades-worth of property taxes” and income from particularly high interest rates in FY2023 and FY2024. She said that she anticipates that interest rates will soon decrease, resulting in, accordingly, lower levels of Free Cash .

Lemieux also noted that the City is struggling to fund its pension and other post-employment benefits (OPEB) liabilities. (The Commonwealth mandates that Newton fully fund its pension liability by 2040.) As of January 1, she said that 67.81% of the pension liability is funded, with $277.8 million remaining; 7.6% of the OPEB liability is funded, with $465.9 million remaining.

Lemieux said that out of 105 pension systems in the State, Newton is ranked 89th in terms of progress in pension funding.

“I was sorry to see that we are still only 67.8% funded for our pensions. We have worked so hard to try to get this number up, and it’s such a challenge,” she said.

NPS funding

“This budget provides much for the Newton Public Schools,” Mayor Fuller said. She said that NPS expenditures will total $292.9 million.

She said that the NPS operating budget would see an increase of 3.65% ($10.3 million); school building debt service payments would see an increase of 10.5% ($2.2 million); the NPS pension fund would see an increase of 8.2% ($795,000); funding for OPEB would see an increase of 8.1% ($533,000); and funding for the salaries and benefits for school nurses and school crossing guards would see an increase of 16.1% ($573,000).

“Adding it up, the total of just those five NPS spending categories exceeds $337 million – an increase of more than $14.3 million, or 4.44%,” she said. “In fact, altogether, there is approximately $44 million in spending for the Newton Public Schools picked up by City departments [outside of the NPS budget].”

Mayor Fuller said that City-side expenditures will total $213.5 million, which is an increase of $7.9 million, or 3.86%.

“I prioritized the Newton Public Schools,” she said.

Mayor Fuller said that because over 65% of Newton’s total budget is spent on the Newton Public Schools, if the school budget rises significantly beyond 3.5% annually, then the City is “cannibalizing” all other public services it is required to fund.

She said that the 3.65% increase to the NPS operating budget she provided is similar to other school districts in municipalities experiencing, like Newton, “modest new growth” in revenues. The Boston Public Schools, for instance, saw 3.5% increase, and the Watertown Public Schools saw a 3.7% increase.

She also noted that she is planning to allocate $5 million in Free Cash to the district, with $2.5 million going to support the operating budget and the remaining $2.5 million going to “priority school facility maintenance projects.”

“While NPS would prefer that the $2.5 million [for facility maintenance] be used for staffing, that particular use is not within the financial guidelines,” she said. “Thankfully, replacing roofs, upgrading bathrooms, and improving heating, ventilation, and air conditioning improves, yes, the learning environment – and also relieves pressure on the NPS maintenance budget, which is underwater too much of the time.”

Moving forward: 9 levers

Mayor Fuller concluded by speaking about funding challenges the City will continue to face in the future.

“The City’s revenues always grow modestly. Our ambitions, and, yes, sometimes our needs, grow exponentially,” she said. “The City continues to have quite a few levers to pull to address these challenges.”

She listed nine “levers,” which she said were not in any particular order:

1. Instituting more efficiencies. Mayor Fuller said that this could take the form of seeking to consolidate Newton’s smallest elementary schools, both of which are the City’s oldest school buildings. She said that it could also take the form of seeking to reexamine other City operations, such as the frequency of recycling collection.
2. Evaluating, continuously, the outsourcing and insourcing of programs and services.
3. Deciding whether to reduce the scope and scale of current operations.
4. Considering whether to slow down the increase in funding of retiree benefits. Doing so, she said, “would keep Newton in the basement on retiree funding level and actually increase the overall cost to Newton’s taxpayers.” She noted that the Newton Retirement Board, which acts independently, has full authority over the decision.
5. Using voter-approved debt-exclusion overrides rather than operating funds for any  new major capital projects. Examples of such projects included the construction of new school buildings or an overhauling of the police headquarters.
6. Negotiating collective bargaining agreements that “maintain parity between revenue growth and growth in compensation and benefits.” She noted that compensation accounts for 88% of the NPS budget and 75% of the City-side department budgets.
7. Supporting new development. She said that new residential and commercial developments increase City revenues on an ongoing basis.
8. Asking voters to consider operating overrides. She suggested following the example of the town of Arlington, which she said calls for smaller operating overrides every four to five years.
9. Modifying Proposition 2 ½ or increasing options for additional city taxes. Proposition 2 ½ is a state restriction on how much a municipality can raise its property taxes, pursuing this option would require working with the state legislature.

“We should think about pulling all nine of these levers right now and using many of them sooner rather and later,” she said.

Mayor Fuller ended her presentation on a hopeful note.

“We’ve got challenges certainly in the world; we’ve got challenges here in Newton. We can do this, and it’s hard. We’ll figure it out. We’re here to support each other,” she said. “I truly believe we are privileged to call Newton home, and I know I am privileged to serve as your mayor.”

She received a standing ovation from the City Council.