The Administration's proposed Fiscal Year 2025 budget was published on May 28 and presented by the Mayor two days later, officially kicking off Budget Season in Somerville. Over the next three weeks, the City Council's Finance Committee performed our duty of reviewing the the proposed budget with a series of departmental budget hearings. This culminated in Cut Night on June 18, where ultimately two cuts and two resolutions of funding reallocation were recommended for approval by the Finance Committee meeting as a Committee of the Whole with all 11 councilors present. Ultimately, at a special meeting on June 20, one of the two cuts -- the one targeting the Chief Administrative Officer position -- was undone by a final vote to accept a revised FY25 budget that restored the CAO position, and the City had an adopted $360 million budget for the new fiscal year that began on July 1.

This FY25 budget process really started back in the winter, with the council and public sharing their budget priorities, including a public hearing on March 19 and the council identifying our stop shared budget priorities at a meeting for that purpose on March 26. Meanwhile, the Administration went through the Performance Improvement Request (PIR) process with staff where department and division heads made a case for additional funds. The Administration worked with Finance and Budget staff to construct a budget, and the result was the proposed FY25 budget released in late May.

Prior to the release of the proposed budget, the City Council had been updated by the Finance department on the conditions impacting the FY25 budget. Adverse global conditions impacting financiers of commercial and resident development has seen the construction boom in our city come to a screeching halt, resulting in a slowing of growth. With sizable obligations for Schools and salary contingency with the number of unions out of contract and expected to settle during the coming fiscal year, and we were warned there would not be much money left for new budget initiatives this year. In fact, the words "level-service budget" were used frequently to manage expectations.

The chart below shows the growth of the General Fund -- the City's annual operating budget -- over the past 20 fiscal years, with the portion of revenues comprised of local aid from the state shown in green:

Now it might appear state aid has held relatively steady for two decades. But if you adjust the $53.3 million received from the state in FY06 to present day dollars, that's a whopping $86.1 million. So really the state effectively has cut local aid year after year by not having it keep up with inflation. And this continued austerity mode at the state level has left us increasingly reliant as a municipality on tax and fee revenues.

However, Proposition ½ limits Massachusetts municipalities to a 2.5-percent annual increase to the tax levy, or the revenues collected from real and personal property taxes. Growth Revenue (the result of new construction, alterations, subdivision, or change of use of a parcel) and Local Receipts (licenses, permits, fees, fines, and local taxes) are exempted from this limit, but this means that when construction slows and building permit revenue drops, the City's new growth also experiences a slightly delayed slow-down and our revenues flatten.

So after years of dramatic growth, this budget season was all about level-service funding -- meaning that we're looking to simply keep doing what we're doing rather than improving or adding on to City services. It certainly beats the situation other municipalities have found themselves facing, with brutal budget cuts and layoffs in the news in recent months elsewhere and debt overrides on the horizon in a number of other communities. Still, with two major pandemic federal funding programs expiring this calendar year -- American Rescue Plan Act (ARPA) on the City side and Elementary and Secondary School Emergency Relief (ESSER) on the Schools side -- a large number of positions and programs stood up by these funds needed to be transitioned onto the General Fund.

So while $22.7 million might sound like a decent-sized increase to our budget, much of that went toward moving ESSER positions in Somerville Public Schools onto the General Fund, putting away funds for expected new collective bargaining agreements with multiple labor unions, and rising health insurance costs. Here's a look at where that $22.7 million went in the FY25 budget as far as increases over their FY24 funding:

Meanwhile, there were two major, big-ticket budget-adjacent issues that came up repeatedly over the past month: a new contract for the Somerville Municipal Employees Association (SMEA) and the FY25 Water & Sewer rates. While these are both budget-related issues, neither one is part of the traditional departmental review process and neither is a traditional budget line. One involves a transfer to a stabilization fund and the other impacts Water & Sewer enterprise fund revenues.

Nonetheless, the Finance Committee went about the work of reviewing the proposed budget. It did feel a little strange to be asking department and division heads about budget line of theirs with a few thousand dollars in it while multi-million dollar question marks loomed over everything. But the committee took its job of overseeing taxpayer funds very seriously and we did a thorough job of that over a series of eight evenings.

Some key takeaways from those meetings include:

• New growth is projected to cool off at around $13 million in FY25, down from a record $17.7 million in FY24.
• Building permit fee revenue is budgeted much lower for FY25, down $3 million from the $8.5 budgeted in FY24. This is a direct result of the aforementioned construction slowdown.
• Revenues from fines for parking violations are going to end up being over $1 million above the $4.78 million budgeted for FY24 as a result of increased enforcement.
• Schools saw the largest budget increase of any department ($6.7 million), with the vast majority of that ($5.9 million) going toward staff salaries that will cover cost of living adjustments, new compliance positions, and the transition of 26.6 full-time equivalent (FTE) positions from ESSER to the General Fund.
• The $7 million Salary Contingency line combines with a $7.9 million transfer from the Salary/Wage Stabilization Fund and a proposed $1 million appropriation from FY24 free cash to mitigate risk from potentially settling with multiple municipal labor unions and the compensation increases (current year and retroactive) that would come with those new contracts.
• The $1.7 million Public Works budget increase is funding a few different things in DPW divisions: negotiated salary increases for School Custodians staff, increased trash and recycling hauling costs for Solid Waste, and higher rubbish removal costs for Highway.
• Health & Life Insurance expenditures are increasing by $1.6 million in FY25 because health insurance premium costs for current City employees ($0.4 million) and pension holders ($1.0 million) both are seeing sizable jumps.
• The additional $1.5 million in the corrected Fire Department budget is mostly attributable to a jump in the Personal Services Salaries line because of the need to hire new staff for the forthcoming Assembly Square fire station, as well as one-time costs for those hires.
• The City's General Fund subsidization of the Ginny Smithers Sanders Pool at the Kennedy School enterprise fund is increasing from $366,737 in FY24 to $659,255 in FY25. This is due in large part to major staffing cost increases.
• There was a large reduction of roughly $1.6 million to the Fire Department budget in the proposed budget, after it was discovered that Holiday Pay the Hazardous Duty Stipend were double-budgeted. Those funds were mostly reallocated, with an additional $1.0 million going to Salary Contingency and $337,219 going to Pay-as-you-go Capital Projects to increase the funding for work like replacing the Kennedy School chiller and planned HVAC upgrades for the Healey and West Somerville schools.
• There were two Taxi to Health programs funded through ARPA grants. The Senior Taxi Program is moving onto the General Fund and will continue through the Council on Aging. However, the program for those under age 60 is not continuing after the end of its ARPA funding. The explanation we were given is that legal difficulties around making a program like this available to the general population make it unfeasible to continue. A number of my colleagues on the council pushed the Administration to do whatever could be done to continue this program, including unanimously passing a resolution to that effect on Cut Night. However, there was no funding for this in the revised budget that ultimately was approved on June 20.
• The aforementioned cut targeting the CAO position proved to be the subject of extensive debate. I'll write more about this later, as it's really not a budget issue and much more of a personnel issue, but it definitely was a major flashpoint for the council this Budget Season.

During the departmental budget hearing for Human Resources, I proposed a cut of $30,778 to the Human Resources Salaries line after learning of coming salary lag due to two positions that became vacant after the publication of the FY25 budget and now will not have anyone in those roles until at least September. That cut amount represents the two months of salary for the two positions that they will be vacant. This noncontroversial cut was approved unanimously by my colleagues on Cut Night.

I then turned around a resolution calling on the Administration to add a third Case Manager position within Health & Human Services after hearing stories from both constituents and current staff about the extremely high demand for these services. Hiring a Social Services Manager should help with Case Manager workflow and efficiency, but I view increasing capacity by hiring an additional Case Manager will help some of our most vulnerable residents in this city. So I was thrilled that nine of my colleagues supported this resolution and even more thrilled to see the Administration come through with a third Case Manager position in the revised budget that came before us on June 20 and ultimately was approved by the council.

Finally, I want to address the motion for sweeping cuts across departments that would've effectively given department and division heads no raises in FY25 as an effort to pressure the Administration to reach a collective bargaining agreement with the Somerville Municipal Employees Association (SMEA). I had serious concerns about this approach, as it felt incredibly misguided and I saw zero upside to it with the potential for significant downside. The City Council had received an email from SMEA leadership earlier that week asking us to support this cut, but when I followed up with SMEA leadership and pointed out my concerns about the actual impact of denying raises to people who have nothing to do with the SMEA negotiations, they walked away from that demand and I was told to do whatever I felt was fair.

So I went into Cut Night with a plan to introduce targeted cuts that would give those involved in SMEA negotiations the same thing SMEA members are getting this year: a one-percent raise, with the remainder put into a salary contingency fund that would be paid retroactively when a contract agreement is in place. I was poised to offer this as an amendment to the motion for the sweeping cuts, but as the originator of the motion, Councilor Scott indicated a preference for an up/down vote on the motion, so I held off on bringing an amendment.

Then Councilor McLaughlin motioned to cut the Chief Administrative Officer position and the motion passed. Given that the CAO has been held up as a key part of the Administration's negotiation team in talks with SMEA, this was a curveball as far as my plan to put the negotiation team in the same position as SMEA workers out of a sense of fairness. And none of the other councilors who indicated an interest in more targeted symbolic cuts moved to make those cuts as well. So we left the Chamber having cut the CAO position -- something SMEA leadership clearly did not ask for at any point.

While the City Council ended up not doing any symbolic cuts to demonstrate support for City workers, there has been a consistent call from the entire council for a sense of urgency to get a contract signed and address some of the compensation issues impacting morale, recruitment, and retention. I'm disappointed that we've reached the final year of the three-year contract cycle without an agreement on that contract. While it might be true that this is part for the course, we can do better by our municipal workers, and I'll continue beating the drum for an agreement that recognizes the invaluable work these folks do for the City.