WORCESTER – After a meager budget for the current fiscal year impacted by rising costs and debt, the city’s proposed budget for the fiscal year beginning July 1 represents a bit of recovery.
However, City Manager Eric D. Batista said during a Friday afternoon budget preview that possible cuts in state aid later this year and expenses such as capital requirements for school projects, combined with rising fixed costs, could pose future constraints.
What are the big numbers?
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The city expects total revenues to be $893 million, with the largest sources coming from state aid for education and property taxes. Revenue increased 3% from the previous fiscal year, or approximately $45.3 million.
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Education, including public schools and charters, represents about 59.7% of the city’s budget, or about $532.9 million. In addition, approximately $22.2 million is budgeted for education-related debt services.
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City operations are the second largest budget category, at approximately $195 million, or about 21.8% of the total.
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Fixed costs such as employee pensions, health insurance and debt payments amount to approximately $165 million, or 18.5% of the budget.
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Public safety, including police, fire, emergency communications and inspection services, will consume approximately $113 million in the budget, an increase of 3.6% compared to fiscal year 2024.
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The Department of Public Works and Parks’ proposed expenditures are $23 million, an increase of 0.7% over fiscal year 2024.
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All other proposed municipal operating costs are $58.3 million, an increase of 7.5%.
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The contingency budget would increase by 59.5%, or about $2.5 million, to about $6.7 million, largely due to the funding of a 3% cost-of-living adjustment for workers in union negotiations.
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Funding for the city manager’s office will see an increase of approximately 33.7%, or about $453,000, as staff from other departments move into the city manager’s office. The council’s budget would increase by 27.9%, or about $140,000, with the council adding new staff positions.
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Total city services, as shown in the budget, are just over $195 million, an increase of 4.4% over the current fiscal year.
As with the current year budget, the theme of the proposed budget is “driving progress,” in line with Batista’s goals of investing in equity and talent.
One priority in the city budget is the centralization of multiple municipal functions. Batista said these functions have been “divided” within different departments, creating “inconsistencies” in city operations.
‘Centralize [these functions] helps bring greater accountability and efficiency in service delivery,” said Batista.
The city has also been working on a pay equity analysis and looked at wages for other municipalities in the state. New positions and reshuffles are part of this process, Batista said.
Non-union employees, about 500 staff, would see wage adjustments of about 1.5% reflecting changes in the market.
“The changes we have made within the unions have not kept pace with non-union represented individuals,” Batista said.
The city must also fund technology, such as recurring subscriptions and implementing enterprise resource planning. Cities’ cybersecurity is also making the transition to the cloud.
For public safety, Batista said the city will continue to budget for recruit classes and recommend that the fire department be re-ranked for floating lieutenants to maintain crew integrity and reduce overtime.
The city will outsource the hiring of lifeguards to the YMCA of Central Massachusetts because finding lifeguards for city pools and lakes was a problem last year.
The city grant writer position will be refunded for next fiscal year after the position is eliminated for this year. Discover Central MA will also receive $500,000 in funding from the city; it had been funded in recent years through federal funds from the American Rescue Plan Act.
Where does the city get its income?
Approximately 43.4% of the city’s projected revenue comes from state education aid – approximately $387.2 million, or an increase of 5.4% over fiscal year 2024. Local state aid amounts to 52.8 million dollars, or 5.9% of the budget, with an increase of 3% compared to fiscal year 2024. .
The city is using Governor Maura Healey’s budget for these allocation projections, and any changes to the state budget will be reflected in the fall. The State House proposed a cut to local aid, which Batista said could impact available aid in the fall if the proposed cut remains in place.
Property taxes represent $396.1 million in revenue, or 44.4% of the budget. The budget projects a 4.9% increase in property tax revenue, including $7.5 million in new growth.
The category with the highest expected percentage increase is local revenues, such as income from investments, permits and excise taxes on motor vehicles. Local revenues make up 6.3% of the projected revenue of $56.7 million and there is an expected increase of 7.3%.
Education
Education expenditure remains the highest category in the budget. The education budget increased by 5.2% compared to the provisional budget for 2024, while the municipal part of the budget decreased by 0.4%.
The education category includes Worcester Public Schools, charter schools and special education programs outside of public schools.
The foundation budget, the spending target imposed on the district, has increased by 31.9%, or $122 million, over the past five years, and the city’s contribution to the budget has increased by 21.6%, or 22, $5 million, up.
Worcester Public Schools’ general fund budget has increased by $113 million, or 30%, over the past five years and by $23.8 million for fiscal year 2025.
Still, the public schools are facing a projected $22 million budget shortfall for next school year, which could mean eliminating more than 80 teaching positions, the superintendent said Thursday during a school committee meeting.
Financing department
For the current fiscal year, the city has cut several activities to reduce costs to about 1.7%, or about $3.1 million.
For the upcoming fiscal year, the city expects funding for city departments to increase by about 4.4% overall, or about $8.1 million.
The city is trying to finance a net of 14 new functions and 40 rearrangements.
Coupled with the unforeseen circumstances, the city manager’s office and council, human resources, finance and police will see their budgets increase for next fiscal year.
Batista said the budget would increase staff by 17.4% as it takes over positions from the Department of Public Works and Parks and the police department. The financial budget would increase by 13.8% in an attempt to centralize purchasing; and police force increases by 9% due to capital expenditures to improve police headquarters, such as the electrical system and roof.
To borrow
Capital borrowings for the next fiscal year have been roughly split into thirds, totaling $135.8 million. Municipal loans are the highest category at about $48.3 million, education loans are about $45.2 million and business loans are about $42.2 million.
A major project to be paid for through loans is Doherty Memorial High School. Others include facility improvements at Worcester Arts Magnet School, DCU Center and Union Station and street redesigns.
Future limitations
In addition to the potential for state budget cuts that will hit the city in the fall, Batista said there is limited growth for local revenues in the future.
If interest rates on investment income remain high, it could help the city. But if rates drop, Batista says, it will impact the city and limit future growth.
The city is also seeing increasing educational obligations through mandatory contributions and capital requirements for school projects.
Other spending constraints may include the rising costs associated with collective bargaining, technology subscription obligations and the increase in fixed costs.
Looking at fixed costs for the coming budget years, Batista said the city is looking at methods to address rising debt.
City council members have expressed concerns about taxing residents to the maximum level, and Batista said the city is trying to find ways to leverage the budget to avoid that.
“I cannot make this decision alone, but the council and the public will have to come to a decision that if we do not take action now to reduce our capital expenditures and manage our debt, we will end up in a place where I can only will continue to recommend (higher taxes),” Batista said.
Batista will present the budget on Tuesday and there will be hearings with the council. The deadline for the budget review is June 20 and the last meeting before that date is June 18.
This article originally appeared on Telegram & Gazette: What to know about Worcester City Manager Eric Batista’s budget plan
