Mayor releases FY 2021 budget
Pandemic impact won’t be felt till following year
Mayor Martin Walsh rolled out a $3.647 billion fiscal year 2021 budget, representing a 4.4 percent increase over last year, and a $3 billion, five-year capital spending plan that includes $500 million in investments for affordable housing.
The budget comes amid great uncertainty as the city, nation and world struggle with an unprecedented shutdown stemming from the coronavirus pandemic.
“This is an unprecedented crisis for the city of Boston and globally,” said Chief Financial Officer Emme Handy, speaking during an online City Council hearing. “It is really difficult for us to understand exactly what that will mean for us more generally in terms of the city’s response, and specifically, how it will impact our finances in the medium- and long-term.”
Nevertheless, strong cash reserves and property tax growth from the last fiscal year mean the city can depend on increased revenue through the 2021 fiscal year, which begins in July, according to Budget Office Director Justin Sterritt.
“The real impact on new growth is actually going to be in FY22, because that number could plummet, basically over the next few months,” he told the council. “It’s something that’s going to trickle into the next few years.”
At 40% of the city’s budget, Boston Public Schools funding is the largest item. An additional $80 million in funding to the schools represents a 7 percent increase. Fiscal year 2021 is the first of three years in which the administration plans to implement a previously announced overall $100 million increase in spending, with targeted investments in 33 schools the state has deemed underperforming.
Funding for meals and Chromebook computers for BPS students has come out of the 2020 budget and will not affect the 2021 budget.
Other spending priorities include investments in affordable housing, including $2.5 million for the city’s first-ever rental voucher program and $1.8 million for addressing youth and family homelessness.
With the ongoing COVID-19 pandemic, the administration has committed $9 million in additional funding for the Boston Public Health Commission, bringing its budget to $100 million.
Walsh said the budget will further his administration’s commitment to equity and help lead the city through the pandemic and its aftermath.
“I believe that with responsible fiscal planning, with investments in the equity, health and well-being of our residents, and with our spirit of courage and collaboration, we will emerge together from this crisis stronger and more resilient than before,” he said in a statement to the news media.
During the City Council budget hearing, Sterritt and Handy took councilors’ questions, many of which were focused on how the pandemic would affect the city’s finances.
Sterritt told the councilors that property tax revenue would not likely decline in the coming years, but he added that a sustained recession could affect real estate development and construction and would have effect on revenue growth. Property taxes on businesses and residences make up 72 percent of the city’s revenue.
Other sources of revenue, including state aid and local excise taxes, could be affected by a downturn in the economy, Sterritt said. The impacts of a recession would be felt more acutely in next year’s 2022 budget.
The city’s current revenue projections assume a resumption of the economy some time in fiscal year 2021.
“The question we won’t know until later down the line is what that new normal looks like, and what is the new baseline of revenue that we’re collecting,” Sterritt said. “That’s really going to be a moving target.”
The city has taken a cautious approach to budgeting, given the economic uncertainty the world economy is facing. The 4.4% increase in the city budget is the smallest in the last five years, according to Sterritt, who said the city is in good position to weather economic downturn, with healthy reserves.
The budget has projected a decrease in local receipts from $97 million last year to $87 million this year, given the lack of revenue from hotel room occupancy taxes.
District 1 Councilor Lydia Edwards questioned whether the city’s capital budget will be able to honor the mayor’s $500 million commitment to affordable housing over the next three years.
Sterritt acknowledged that much of the funding for the construction and preservation of affordable housing will depend on the state Legislature supporting the mayor’s bill establishing a Boston real estate transfer tax and the planned sale of the Lafayette Garage, neither of which is a certainty.
“Beacon Hill has functionally come to a stop over anything that’s non COVID-related,” he said.
Sterritt said, however, that the housing voucher program will move forward.
“We do feel like that’s a program that will ramp up over time,” he said.