Boston faces $48 million budget gap

Boston has a $48.4 million budget deficit that must be addressed this fiscal year which ends in June, city officials said Monday.

The gap, driven in part by snow removal, overtime and soaring health care costs, represents about 1% of the city's annual budget, according to Boston Chief Financial Officer Ashley Groffenberger. City officials may need to dip into reserves to cover the shortfall.

Groffenberger did not immediately answer specific questions about layoffs or whether the city plans to cut services to balance the budget. But the city has decided to tighten spending across departments to preserve core services like trash pickup and library hours, Groffenberger wrote in a letter to the city council.

“The City has strengthened expenditure controls for the remainder of the Fiscal Year to further offset this projected deficit and is actively implementing additional measures, such as tightly managing all discretionary expenditures and hiring through the final quarter, which begins on April 1,” she wrote in the letter.

The city overshot its snow removal budget by $47 million during the snowy, frigid winter. Public safety overtime exceeded the budget by $48 million. The city recently moved to  limit coverage of GLP-1 weight loss drugs which have driven up healthcare costs, saving the city nearly $11 million, but insurance costs remain a major challenge.

The Wu administration will deliver a budget for the next fiscal year to the city council next week.

Officials said they won't ask voters to override Proposition 2 ½, which limits how much a city or town can increase total property taxes. But they said they are evaluating the potential need for a supplemental budget appropriation.

While the city brought in stronger than expected revenue overall, particularly from excise taxes, new money from building permits has fallen short of expectations by a projected $7 million.

In terms of new growth, the city banked $78 million, more than the $60 million projected in the budget. That’s down from the 2024 historic high of $122 million  — a concerning marker given the city's past reliance on growth to cover deficits and expand the budget.

The $48.4 million deficit does not include figures from Boston Public Schools, which has its own  $53 million budget deficit.

The financial trouble isn't limited to the current fiscal year, which ends June 30, Groffenberger said. Revenue growth is expected to remain blunted for fiscal 2027, as health insurance costs continue to rise. And another winter of heavy snow and ice could further stretch the budget.

“With fewer resources available to absorb rising costs, targeted reductions and careful prioritization will be necessary as we work to deliver a balanced budget,” Groffenberger said. “It is critical that we budget responsibly in order to mitigate future risks and ensure the long-term fiscal stability of the City.”

At-large City Councilor Erin Murphy said the budget update revealed a wider and more concerning picture about the state of the city's finances.

"We are seeing declining commercial property values, slower growth, and rising fixed costs, and that is going to continue putting pressure on this budget year after year," she said.

Murphy, a frequent critic of the Wu administration, said the city's efforts to tighten hiring and restrict discretionary spending don't go far enough.

"My concern is that the administration continues to downplay the full scope of what we are facing," she said. "This is not a one-year problem. It is a trend, and we need to be honest about it."

Editor's Note: This story had been updated to remove an incorrect figure on the city's fixed costs in its budget.