Fiscal Year 2018 Budget

Beginning July 1, 2017 and ending June 30, 2018

Last updated: 4/13/17

Revenue overview

The FY18 Recommended Budget is supported by $3.14 billion in total revenue, an increase of $143 million, or 4.8%, from budgeted FY17 total revenue. The FY18 Recommended Budget includes $3.1 billion in recurring revenue and $40.0 million in non-recurring revenue.

Over the past decade, the City’s revenue structure has shifted toward a growing reliance on property tax. Property tax, excise taxes, and license and permit revenue lead local revenue growth and are driven by an expanding economy.
Ninety-three percent of tax revenue growth is from locally derived sources such as property tax and other local revenue.
Property tax growth

Due to the strength of Boston’s property tax, growth exceeds the average annual growth of 3% that Boston has seen over the past decade and is able to support the growth in fixed costs and the City’s investment in education. Property tax growth strength is expected to continue in FY18, primarily due to the unprecedented strength of Boston’s development climate.

Declining State revenue

Taxes paid by new construction is added onto Boston’s property tax levy, which can otherwise increase by a maximum of 2 ½ percent, annually. Thus while the City is projected to experience robust property tax growth in FY18, that growth is offset by sluggish and unpredictable state revenue growth.

Education spending

The share of net property tax has increased dramatically since FY08 while the share of state aid has steadily decreased.State revenue, the City’s second largest revenue source, never recovered following the last recession. In FY18, Boston’s state revenue is still $52.8 million, or 10.7%, lower than Boston’s state aid in FY08. While Boston’s spending on education has increased substantially, Boston’s state education funding has not kept pace.

The Chapter 70 education aid formula does not work for Boston, and thus Boston’s Chapter 70 growing by 0.6% or $1.3 million in the Governor’s proposed budget, a stark contrast to the $57.8 million more Boston expects to spend on education in FY18.

Charter schools

Additionally, while Boston’s charter school assessment has risen by 155% since the enactment of the 2010 Achievement Gap Legislation, the State’s statutory obligation to fund charter school reimbursement has not kept pace. As a result, the City of Boston is projected to lose $25 million in the Governor’s FY18 budget, adding to the total lost revenue of $48 million over three years (FY15 - FY17).

Education finance reform

In light of the growing chasm between education costs and state revenue, Mayor Walsh filed comprehensive education finance reform legislation that aims to invest equitably in public education and expand access to high-quality education for students of all ages by:

  • proposing a creative revenue solution to provide every Boston 4-year old a high-quality seat
  • fixing the broken charter school transition funding model, and
  • increasing BPS reimbursements for the highest-need students.

The proposals would increase annual education funding to Boston by $35 million in its first year of implementation. The proposal would also position Boston to receive $150 million in additional annual Chapter 70 aid within a few years if the state identifies a new revenue source for education.

Local receipts

Local receipts, which include revenues such as excises, fees, fines, and permits, are projected to grow at $26.3 million, or 5.5%. Boston is projecting strong room occupancy and meals excise revenue as well as continued permit revenue growth from commercial and residential real estate development and increased revenue from parking fines. The FY18 Budget also includes $2 million in new revenue as a result of the state legislation that passed in 2016 to create a per-ride assessment collected from transportation network companies (TNCs) such as Uber and Lyft.

Maximizing local revenue tools

With limited revenue tools, the City is expanding its efforts in FY18 to better maximize the available local revenue tools. The FY18 budget includes an additional $9.7 million identified in departmental revenues. In FY18, the Office of Budget Management will initiate revenue audits to verify the accuracy of information reported with certain fees. The City anticipates recovering $2 million in additional revenue through these audits. This City will also work to maximize federal health insurance reimbursements.