Mayor Fuller announces excess of $40 million budget surplus

Newton Mayor Ruthanne Fuller announced on Friday a surplus of funds totaling more than $40 million in two city accounts.

And she’s calling for the money to be spent on Newton’s schools and pension liabilities, outlining a plan for each as part of a long-range vision.

“This initiative will provide additional financial support for the operations of the Newton Public Schools for the next eight years while helping the City fully fund the City’s pension system on our agreed upon schedule of Fiscal Year 2032,” Fuller wrote in an email to residents Friday morning.

Where did it come from?

Some of that money—$20.5 million—comes from an overlay account managed by the Newton Board of Assessors, which sets money aside money for potential abatements, real estate tax exemptions and other situations in which the city can’t collect taxes on a taxable property.

Last year, Eversource challenged property taxes the city said the company owed for fiscal years 2012 through 2022. The disputed tax funds—more than $12 million—had to be set aside for the appeal process, but the company has since dropped its appeal for 2012 through 2020.  

“As a result of the Eversource withdrawal of nine of their eleven appeals, the resolution of several other cases, and the passage of the Appellate Tax Board (ATB) filing deadline of August 1, Newton’s Board of Assessors is poised to declare a significant amount of Overlay Surplus—$20.5 million,” Fuller wrote in an email announcement to residents.

Newton mayor’s office Photo by Gail Spector

Another $5.5 comes from the Appellate Tax Board Interest and Penalties Account.

“In total, we expect the City will soon have available one-time funds of $26 million—$20.5 million in Overlay Surplus and $5.5 million from the Appellate Tax Board (ATB) Interest and Penalties Account,” Fuller continued.

The rest comes from the city’s free cash account. Every year the Newton Comptroller’s Office typically determines in August or September exactly how much free cash the city will have in the next fiscal year, and this year brings good news for the city’s coffers.

“We expect Free Cash to be certified in late September or early October in the range of $21—$23 million” Fuller said. “These are also one-time funds.”

Where will it go?

Fuller said she plans to use the surplus funds to help Newton’s schools and ramp up the city’s efforts to fund pension liabilities.

City employee retirement funding has been a point of concern for years, as the cost of promised future retirement benefits has risen to hundreds of millions of dollars. The Newton Retirement Board has approved a payment schedule aimed at getting the city to full pension funding by FY 2032 by increasing funding by 6.6% every year until then.

But the mayor plans to instead increase funding by 5% from the General Fund and the remaining 1.6% from an Operations Stabilization Fund over the next eight years, to free up some money for schools.

The help for the city’s schools comes as Newton Teachers Association and Newton School Committee have been in tense contract negotiations for months, with the sticking point relating to pay raises.

The Newton Education Center. Photo by Dan Atkinson

“In so doing, we will be able to repurpose the value of the 1.6% primarily to fund NPS operational needs,” Fuller continued. “We intend to appropriate 70% of the ‘savings’ generated by this fund to the Newton Public Schools each year with 30% used to reduce the City of Newton forecasted gap. To put this in context, 65% of the City’s overall expenditures are directed to the Newton Public Schools so I am prioritizing our students and the strength of the Newton Public Schools, Newton’s keystone.”

This means a 3.7% increase for the school system through FY 2032 instead of the earlier budgeted 3.5%. And that translates to a $462,000 increase for FY 2025, growing annually to nearly $5.5 million in FY 3032, she explained.

Whether to spend that on teacher pay increases to bridge the divide in the ongoing contract negotiations is up to the School Committee, according to Ellen Ishkanian, communications director for the mayor’s office.

But first, allocation of the surplus funds and establishment of the Operations Booster Stabilization Fund will next go to the City Council for a vote.