Fiscal Year 2018 Budget

Beginning July 1, 2017 and ending June 30, 2018

Last updated: 4/13/17

State aid

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.

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).

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.

State aid overview

State aid refers primarily to distributions from the Commonwealth to municipalities for Chapter 70 Education Aid, Unrestricted General Government Aid, Charter School Tuition Reimbursement along with other relatively small Commonwealth programs such as library aid and various reimbursements.

State aid, as it is used here, excludes any grants to or offsets for direct expenditure by City departments. It also includes reimbursements from the Massachusetts School Building Authority (MSBA).

The City received general fund gross state aid totaling $413.4 million in FY15 and $421.6 million in FY16. The City expects to receive $429.9 million in state aid in FY17 and has budgeted $440.5 million in gross state aid in FY18, 2.5% over FY17.

Municipal Charges

“Municipal Charges”, also known as, “State Assessments” are charged by the Commonwealth to municipalities for items such as Charter School Tuition Reimbursement and MBTA service. State aid distributions are reduced by the amount of assessments charged to a municipality. The City paid $211.7 million in FY15 and $230.6 million in FY16. The City expects to pay $245.8 million in assessments in FY17 and is budgeting $264.9 million in FY18.

The largest assessments are those of the Charter School Tuition and MBTA. The former has rapidly increased since the enactment of the 2010 legislation that expanded the number of charter school seats.

Net state aid trending down

Net state aid, which is gross state aid revenue minus state assessments, has been trending down steeply since FY02. The rapid annual increase in the Charter School Tuition Assessment, combined with reductions in education and general government aid, contributed to this trend. State aid has been reduced substantially over the course of the last two recessions. Since FY02, net state aid (defined as state aid revenues less state assessments) to the City has been reduced by over $252 million or 59%. The City lost approximately $79 million between FY03 and FY05, gained approximately $16 million between FY06 and FY08.

With a decrease in net state aid for FY18, Boston is $189 million, or 52%, below its FY08 level of net state aid of $365 million. For FY18, net state aid is expected to decline by $8.4 million or 4.6% from FY17.

Pressure on local revenue sources

This loss of resources has put extraordinary pressure on the property tax and other local revenue sources as well as levels of expenditures. To mitigate some of this loss, the state expanded local option taxing authority and created savings opportunities, but their combined value does not offset the aggregate losses in net state aid.

Net state aid amounted to $201.8 million in FY15 and $191.0 million in FY16. FY17 budgeted net state aid totals $184.1 million and the FY18 Budget assumes a reduction to $175.7 million. The City’s FY18 state aid estimate is based on the Governor’s proposed budget released in January.