The $48.4 million deficit amounts to roughly 1 percent of the city’s $4.8 billion operating budget, and as of last June, Boston had about $1.2 billion in reserve funds to fall back on, according to the city’s most recent financial report.
But the anticipated shortfall is the starkest indicator so far of the city’s financial challenges as it approaches its next fiscal year, which starts on July 1. Wu must file her budget proposal by April 8.
“The city of Boston has a huge cushion,” said Steve Poftak, president and chief executive of the Boston Municipal Research Bureau, a municipal watchdog organization. But he said covering operating expenses with reserves is “not a sustainable, long-term strategy.”
There “have to be some cuts, and really at the end of the day, it’s compensation for employees . . . where most of the money is,” Poftak said.
Groffenberger on Monday warned the city is preparing to implement more cuts in the mayor’s upcoming budget plan. But Groffenberger declined to specify how many employees the city might have to lay off or what programs could be on the chopping block. She emphasized the city is aiming to preserve basic services, such as trash pickup and library hours.
“With fewer resources available to absorb rising costs, targeted reductions and careful prioritization will be necessary,” Groffenberger wrote in a letter to the City Council on Monday.
The Boston Globe previously reported that the city was already on track to spend nearly $37 million on snow removal by the end of January, or more than double what officials had budgeted, after the first of two historic storms buried the region in snow.
Groffenberger said Monday that officials are anticipating that snow removal costs will ultimately be $47 million over budget, and that Boston police will exceed its overtime budget by $49 million.
Groffenberger told the council on Monday that officials expect the steps they’ve already taken to curb spending will help close the $48.4 million budget gap by the end of the fiscal year on June 30. But the city is still considering other options, including dipping into reserves.
The Wu administration has also already moved to limit coverage of GLP-1 weight loss drugs and other medications on employee health insurance plans, which officials hope will save the city nearly $11 million next fiscal year.
Officials said a spike in employees taking the popular but expensive weight loss medications has posed a strain on the city’s finances.
Boston is not alone in experiencing significant financial challenges. Municipalities across the Commonwealth report having to make dramatic budget cuts as costs, particularly related to health insurance, skyrocket. State law also restricts whether and how municipalities can impose new taxes, or raise existing ones, which local officials argue limits their revenue streams.
Municipal officials are also scrambling to figure out how to pay for digging out from the winter, with cities and towns from Boston to Mattapoisett busting their snow budgets. The Massachusetts Department of Transportation has already spent more than $185 million on snow and ice removal this winter, and state officials are weighing whether to seek aid from the Trump administration.
That Boston might resort to using its reserve funds to plug a budget gap hearkens back to some of the darkest days in municipal finances during the Great Recession.
In the spring of 2009, then-Mayor Thomas M. Menino pushed for state approval to increase the city’s meals tax, and pressured city unions to agree to delay raises for a year as Boston faced a projected budget deficit of $140 million, the Globe reported at the time.
The city ultimately had to fire nearly 300 workers, opt to not backfill vacant positions, and cut police and fire academy classes, the Globe reported. Boston also drew $45 million from its reserve fund, and used more than $20 million in federal stimulus dollars.
And in February 2010, City Hall again faced a roughly $42 million budget shortfall. By the spring of 2012, the city had cut more than 1,100 positions since 2009.
But 2012 also proved to be a turning point for the city, as health insurance costs dropped and excise tax revenue surged. That year, Menino proposed a budget that did not include pulling from the city’s so-called rainy day fund to pay some bills. It was only the second time the city had avoided doing so in the previous decade, the Globe reported.
Niki Griswold can be reached at [email protected]. Follow her @nikigriswold.
