Today’s Fig City News also featured this in-depth piece by Amy Sangiolo explaining every thing you need to know about “structural deficits”.
Those graphs don’t paint a pretty picture.
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Thanks for Amy for this great resource. Few people could put it together.
Just for extra information, there are many responses to questions that have been raised about extra sources of funding – “free cash”, the Eversource lawsuit with the city, the pension overlay fund, ARPA funding – on the city’s override website:
https://www.newtonma.gov/government/mayor-fuller/override
The city is constantly updating this site with additional answers as questions are raised, so check back.
For instance, the “free cash” and pension overlay fund are historically full because of a lawsuit with Eversource where they undervalued there multiple properties in the city. Newton and other communities won a lawsuit, but the city has to be very careful about spending this money because Eversource may win on appeal and get the funds back plus interest. This is a complex area that I don’t fully understand, but I appreciate a level of caution being exercised.
There’s also a breakdown of where the “free cash” (end of year money that was budgeted but not spent – think snow clearance money) is currently being earmarked for: Engine #7 replacement, three police cruisers, the turf and track at Newton South, and a big chunk for the bond for Horace Mann’s addition. City Council is fully aware of these items and has, I believe, approved them.
Just because the money hasn’t been spent doesn’t mean that it hasn’t been allocated for clearly important things.
The idea that our leaders would be leaving large pots of unspent money lying around, courting anger from their constituents, defies everything I know about human nature.
Can this be overlaid with the actual gap.
@Scott: I think that the “actual gap” is zero because all municipalities in Mass. (except Boston; go figure) are required to balance their budgets. So the big question is always: How to close that gap? Amy’s article aims to describe the various ways that can be done.
@Scott – I’m not sure what you are asking. That right most blue plot is the most recently calculated projections of what the actual gap will be in each of the next five years.
The school budget always increases.
Lets review:
-Mayors kids all went to private school, evidence she dgaf about nps
-last yr created a crisis which she miraculously solved.
-again, denies nps funds and calls for the voters to fund it if they care, cause she doesnt,
By committing to pensions she chose explicitly to take money from elsewhere as Mike said. It came from NPS. Not banning natural gas (stupid), not climate stuff or pie in the sky crap. NPS.
It wasnt her “platform” but it sure was her goal.
Prove me wrong, budgets grow every yr, thats normal, threatening 40-50 teacher jobs is not normal,
Frank, NPS budget went up last year at a rate higher than other departments (3.5% vs 3%). Lots of ARPA money went into schools. But the mayor has said that one-time funds can’t solve NPS structural deficits. And that’s right. The mayor is proposing an ongoing revenue source for an ongoing budget issue. That’s the operating override, which is majority spending on schools (if you count Horace Mann). Like the override or don’t, but the mayor’s putting political capital into getting is passed. (We can certainly argue how much one-time money should be committed to bridge NPS provided there *is* a long-term budgetary solution. I support it.)
The “threat to teachers” is a structural NPS deficit caused by rising post-pandemic costs, special education, out of district placement, and other factors. Newton’s hardly alone in these challenges, but we have little budget flexibility and essentially no hope for additional state aid (looks like no “Millionaire’s tax” windfall for us.).
Saying that someone with kids in private schools can’t care about public schools is groundless. It’s just a personal dig.
On the pensions, essentially all of our peer communities have a similar payoff schedule (2030) for pensions as Newton. This isn’t some special mayor thing, she’s just the person who decided to bring Newton in-line with other municipalities and what was then state law.
Since my last comment I’ve also learned that the Newton Retirement Board actually sets the payment schedule. If they don’t get what they want from the city, they can actually have the state withhold local aid to Newton to fund the pension plan. So the mayor or Council can’t take action without convincing them, and their priority is the health of the fund. It’s unlikely they are going to accept some radical non-emergency changes to the funding structure.
Frank the mayor has proposed three tax overrides with 2 and 1/2 of them dedicated to funding the schools. As will happen with any mayor proposing tax overrides she’s taking a lot of heat for it, both here and in various other public forums.
That doesn’t sound like an official you can describe as hellbent on de-funding the schools. It sounds more like someone who’s willing to take some political heat in order to fund the schools.
Good story by Amy. Mike, I didn’t see any explanation on the City’s website about why the City can’t reduce it’s contribution to the Pension deficit since we have an extra 10 years to fully fund it. (And maybe even longer if the State changes the law again)
Under my analysis if we kept the pension contribution flat at $39 million like we are doing with our contribution to our bonded debt -$25 million-we would have at least an extra $13 million a year which would almost cover all of the override costs.
Correct me if I’m wrong, but I haven’t seen any reason why we couldn’t do such a plan.
Same for spending from the Rainy Day Fund. What’s the point of a Rainy Day Fund if you don’t spend it? The City claims it needs to keep 5% of the city budget in the Fund, but there’s no law that I’ve seen that requires that.
If you are looking for the legal basis for the 5% rule for the Rainy Day Stabilization Fund, please see the following (from the Newton Comptroller’s Annual Financial Report, June 30 2020):
On October 4, 2010 the Mayor and Board of Aldermen voted to establish a Rainy Day Stabilization Fund pursuant to the provisions of Massachusetts General Law Chapter 40, Section 5B, and to make an initial contribution of $2,643,271 to the new fund from the City’s General Fund (certified free cash). Board order #224-10 specifies that resources accumulated in the Rainy Day Stabilization Fund are intended to address extraordinary and unforeseen expenditure contingencies and/or cyclical declines in operating revenues. A two thirds vote of the membership of the Board of Aldermen is required in order to use funds
that have been accumulated in this fund and/or to change the purpose of the fund.
On April 20, 2011 the Mayor and Board of Aldermen voted in Board order #78-10 to amended the City’s financial management policies to provide more detailed language regarding target funding plans for the Rainy Day Stabilization Fund; purposes for which it may be used; and limits on the amount of the fund that may be used in a single fiscal year. The target amount of the fund is 5% of the City’s annual operating budget (approximately $15 million) and it is the City’s expectation that supplemental contributions will be made from available General Fund free cash until such time as the sum of such contributions and
accumulated investment income reach the 5% target.
@Arthur I’m not sure from your comment if you realize that fully funding our pension obligations is only one part of the challenge; the other part is also fully funding our OPEB (other post-employment benefits, eg healthcare).
So, “[t]he Fuller Administration’s funding strategy is to make significant investments in the pension system for the next seven years, until full funding, currently projected in the year 2030. Then, the City of Newton will begin significant investments in the retiree health care or OPEB liability. In other words, with the projected full funding of the Newton
Contributory Pension Retirement Fund in FY2030, the City will then repurpose $50 million in pension liability appropriations to the OPEB Trust Fund. This is a viable, sustainable financial strategy to fully fund all the City’s retiree costs by FY2045.” (From p. 38 the City’s 2024-28 Long-Range Financial Plan, which Amy helpfully links to in her excellent summary–if you haven’t already, you may want to read the whole section, starting at p. 31.)
As I posted on the West Newton email list, a change to the pension contribution would require debate, consensus, and approval by the Mayor and City Council, who have apparently looked into this issue but have taken no action so far.
Given the Mayor ran on a platform specifically to fix the unfunded pension issue, and that many of peer communities are aiming for 2030 and in general are ahead of us in funding (Wellesley will fund pensions *and OPEB* by 2030), consensus on this issue is far from certain.
As a sanity check, politicians seldom leave accessible money lying around for no reason, so one can assume there’s a reason this pot of money hasn’t been tapped.
Finally, any funding plan has to be approved by the Newton Retirement Board, which I’ve been told has the power to go to the state directly and have funds taken directly from Newton’s local aid if the board considers contributions insufficient.
This is an interesting idea and a topic that’s important to educate the public about. But it is not a quick fix to funding our schools, roads, parks, and other priorities in the override.
Briefly on the rainy day fund. I don’t think today is a rainy day. The pandemic was a rainy day, but we got federal money to fill our gap. We have a structural deficit in the city and NPS, and we can’t solve it with one-time money. Other communities like Watertown are paying for all their new schools in-budget with lots of development. We have development in pipeline, but even when it’s online it will be less than out peers. That’s a choice, and there are consequences.
It’s funny that the override has somehow made all these issues (development, schools, infrastructure, bonding, budgets, retirement funds) much more tangible. Understanding all this stuff isn’t for everyone, but I think there’s been a much better effort to get information out to people than ever before. I think it’s empowering, even if it is still incomplete.
@ Mike – well said. The mayor ran on a platform to fund the pension. She also ran on a platform to defund NPS. As mentioned earlier, budget has to be balanced. She chose to defund NPS to pre-fund pensions as a campaign promise.
Cheers to her for following through, most politicians don’t. But this is exactly why I will be voting no to the general override. For me, NPS is more important than pensions. Others disagree which is fair. Debate, build consensus, etc and we can shift funding.
Instead, they are asking the city to debate and pony up more than the law allows. You are working to build consensus around yes. I am looking to build consensus around no. Defunding NPS is not a good strategy, sorry. There may have been friction between the NTA and the Parents around covid reopenings and rules…but that friction is gone. This override and the need for more in coming years to fund NTA salaries aligns the NTA and Parents. That will be powerful.
@Frank D – Where did you get that the mayor “ran on a platform to defund the NPS”? The school budget has increased every year of her administration.
Meryl.
From your quotation-“the Rainy Day Stabilization Fund are intended to address extraordinary and unforeseen expenditure contingencies and/or cyclical declines in operating revenues.” However, you want to call it, there are either extraordinary expenditures or cyclical decline in operating revenue, so the Rainy Day Fun is needed to keep teachers in the class room.
Also, I’m not debating the need to fund the Pension/OBM accounts. I’m questioning the timing. Under the city’s scenario, they’re saying it’s more important to fund those accounts then replace dilapidated schools. They could easily have taken the money from the Pension contribution and devoted it to school building. Then we could have had an override debate over whether we needed an override to fund the Pensions early.
I would have liked to seen the vote on that one! :)
I also don’t understand why the city is pre-funding all its pension obligations.
Also, when money is saved to meet future pension obligations, how are these pension funds invested and what returns are assumed on these investments? The return on debt, for example, has increased significantly in the past year, which would in turn impact the amount of money needed to be contributed to meet future obligations.
Finally, does anyone know how Newton ranks with respect to its employee benefits vs. other towns? If we’re higher than the norm, benefits should be cut for new hires.