Revenue

Local sources continue to drive revenue growth in FY18, as property tax and local receipts make up 93% of revenue growth over FY17. While the City is expected to experience continued robust property tax growth in FY18, overall revenue growth is expected to be hampered by sluggish state revenue growth. State revenue, the City’s second largest revenue source, never recovered following the last recession, and in FY18, Boston’s state revenue is budgeted to grow at 2.5% over FY17. Net State Aid (state aid net of assessments) is budgeted to decline as continued increases in state assessments for charter school tuition surpass stagnant budgeted state revenue.

Expenditures

On the expenditure side, the FY18 budget reflects an increase of $144 million or 4.8% over the FY17 budget. Of that growth, 40% is dedicated to education (including Boston Public Schools and Charter School Tuition Assessment), 38% will go to all other City Services (such as Police, Fire, and Public Works) and the Public Health Commission, and the remaining 22% of growth will be consumed by pension, debt service and other fixed cost expenditures.

Revenues

The City’s projected revenues provide the basis for planning FY18 appropriations to maintain a balanced budget. Selected FY18 budgeted City revenues compare with FY17 budgeted revenues as follows: the net property tax levy increases $110.7 million or 5.4%; excises increase $720 thousand or 0.4%; miscellaneous department revenues increase by $9.7 million or 17.4%; licenses and permits increase by $3.5 million or 5.6%, and state aid increases by $10.7 million or 2.5%.

Expenditures

On the expenditure side of the budget, total appropriations increase by $94.1 million or 4.0% and fixed costs increase by $49.6 million or 8.0%. Selected FY18 budgeted appropriations compare with FY17 budgeted appropriations as follows: City Appropriations increase $32.0 million or 2.7%; the Boston Public Health Commission increases by $1.8 million or 2.3%; and the School Department increases $29.2 million or 2.8%. In addition, collective bargaining reserves are set aside for the School Department at $20 million and City Departments at $27 million; when collective bargaining agreements are negotiated, these reserves will be used to cover those increased costs. Within City Appropriations, actual City Departments are increasing by $25.6 million or 2.7% over FY17.

Other increases

These departmental increases are low relative to other years due to the expiration of nearly all collective bargaining agreements, 11 central appropriations, including a large appropriation for Health Insurance totaling $216.9 million which is increasing by $10.6 million or 5.2% and is also included within City Appropriations.

FY18 budgeted fixed costs are increasing by $49.6 million and compare with FY17 budgeted fixed costs as follows:

• Pensions increase $18.9 million or 9.5%;
• Debt Service increases $10.6 million or 6.1%;
• Charter School Tuition state assessment increases $17.5 million or 11.2%;
• MBTA state assessment increases by $0.8 million or 1.0%; and
• other state assessments increases $69 thousand or 1.5%.

Personnel Services include salaries, overtime, unemployment compensation and workers’ compensation, and collective bargaining reserves for estimated wage increases for union employees whose agreements are not settled. Most of the City’s collective bargaining agreements expired in FY17.

Negotiations for successor agreements are ongoing. Avoiding arbitration, the City and the Boston Police Patrolmen’s Association agreed to a new contract through June 30, 2020. The agreement includes annual general wage increases of 2%, other benefit enhancements, and full restoration of Quinn Bill benefits reduced by the State in 2009.

The Health Benefits category includes the cost of health, dental and life insurance for City, BPS and PHC employees and retirees, employer Medicare payroll taxes, and the appropriation for Other Post-Employment Benefits (OPEB).

The Contractual Services category includes expenditures for communications, repairs and service to buildings, equipment and vehicles, transportation, trash collection and disposal, as well as outside legal, advertising, and printing expenses.

Included in the “Other” category are supplies and materials such as gasoline, uniform allowances, office supplies, workers’ compensation medical expenses, medical indemnification in the Fire and Police Departments, legal liabilities, and aid to veterans. Also included in the “Other” category are appropriations for equipment, vehicles, a risk retention reserve, the Housing Trust Fund, tax title, and funding for the City’s outside audit.