Worcester eyes 'strategic ways' in fiscal 2024 with lean budget
WORCESTER — As Worcester faces a challenging fiscal year influenced by factors such as rising costs and debt, City Manager Eric Batista is proposing a fiscal 2024 budget that keeps spending on city services tight while making key investments in its stated diversity and equity goals.
What are the big numbers?
The city is assuming total revenue to be $847.7 million with the largest sources coming from state aid for education and property taxes. Revenue has increased 6% from fiscal 2023, about 47 million.
Education, including public schools and charters, make up 60% of the city's budget with $507.4 million going to education.
The second-biggest expense category is fixed costs, such as benefits, debt, financial plan funds, snow, streetlights and intergovernmental costs, at 18.5% of the budget, or $156.6 million.
Public safety, including police, fire, emergency communications and inspectional services, is 12.8% of the budget, or $108.4 million.
The Department of Public Works & Parks is 2.7% of the budget, or $23 million.
All other municipal operations make up 6.2% of the budget, or $52.3 million.
The budget for the newly reorganized Executive Office of Diversity, Equity & Inclusion saw a 67.1% increase, to a budget of $744,423.
Total city services, as represented by the budget, stands at $183,708,699, a 1.7% decrease from fiscal 2023.
What is the goal of this budget?
Batista said the theme for the fiscal 2024 budget is "empowering progress" with hopes to invest in equity and talent while remaining lean in "strategic ways."
For city departments, City Chief Financial Officer Timothy McGourthy said the city has made various reductions in operational costs to reduce costs to about 1.7%, or around $3.1 million. Most saw single-digit percentage changes to their budgets year over year.
Batista said the budget year required the city to hold off on many demands from departments.
"It was a really tough year for budgeting, so we had to make adjustments in every single department and say no to certain things and not increase areas where departments wanted or needed," he said.
The city started the budget process in a $6 million deficit, Batista said, due to cost increases related to inflation, a competitive labor market, new technology becoming an operational expenditure and debt.
Borrowing to rebuild two high schools in five years significantly impacted debt, Batista said. The city manager said the investments in the area around Polar Park are generating enough revenue to offset the debt the city took on to build the ballpark.
McGourthy added some departments that may appear to be seeing budget increases because they had obligated increases. Without certain decisions to make cuts, those department increases would have been higher.
Where does the money come from?
The makeup of total revenue is 44% state aid through education and 44% property taxes, $368.9 million and $375 million respectively, with 6% coming from state local aid for municipal needs and 6% from local receipts such as investment income, licenses and permits, trash collection and entertainment.
The city is expecting a significant increase in state aid to education funding, about a 14.4% increase, due to funding from the Student Opportunity Act. There is expected to be a more modest increase in local aid from the state, a 1.6% increase.
The property tax revenue has increased 4.6% and local receipt revenue has increased 4% year over year compared to the fiscal 2023 preliminary budget. However, the proposed local receipts for fiscal 2024 slightly decreased compared to the adopted fiscal 2023 budget when adjustments were made in the fall.
McGourthy said the budget will be adjusted in the fall to include any additional funding sources it receives and any state aid changes that may increase revenue.
Education funding
Education funding is by far the biggest listed expenditure category in Worcester. The education budget increased 11.3% compared to the preliminary fiscal 2023 budget.
The education category includes Worcester Public Schools, charter schools and special education programs outside of public schools. For public schools, the city has a budget of about $462 million, McGourthy said. The public school budget has increased $45.84 million year over year.
The foundation budget, the spending target imposed on the district, has increased 25.94%, or by $98.44 million over the past five years, and the city's contribution to the budget has increased 15.72%, or by $16.36 million. The contribution for this year is about $138 million.
Batista and McGourthy said the city spends in excess of the required contribution, but the excess spending in fields such as transportation, rental vehicles or crossing guards does not count for net school spending in fields.
McGourthy said the city has met the net school spending requirement for the past eight to 10 years.
Capital borrowing for education, which the city expects to be the second-highest category of capital borrowing after enterprise-related borrowing, is also not factored into the city's contribution to schools, Batista said.
Other expenses
The highest category for fixed costs is debt services, at 27%. Pensions and health insurance follow at 24% and 20%, respectively. McGourthy said fixed costs slightly decreased compared to fiscal 2023 due to the city deciding to keep health insurance costs down and not funding some stabilizing funds.
Some departments are seeing notable shifts.
The Executive Office of Diversity, Equity & Inclusion received more funding to retain a firm to search for a chief diversity officer and to carry investments made in the prior fiscal year, such as creating three new positions and transferring existing positions to the department.
The Election Commission received a 33.2% increase in anticipation of three elections within the fiscal year. The Department of Innovation & Technology increased 24.8% as the city looks to implement an Enterprise Resource Program and the city moving to Microsoft 365, Batista said.
However, the city decided to delay funding a record management system and computer-aided dispatch for police and fire for a year.
City law, insurance and court and Health and Human Services departments are seeing notable decreases, 12.4% and 18.5%, respectively. Batista said the law departments made changes in staffing and a decrease has come as a result of court judgments. Health and Human Services also saw position adjustments with some moving to Diversity, Equity & Inclusion and reductions in grant funding.
The Executive Office of Economic Development and City Manager's Office saw significant changes in funding largely in part to moving the cultural office to the Executive Office Economic Development.
The License Commission is also moving from the Executive Office of Economic Development to Inspectional Services to put all permitting and licensing under one department.
The Fire Department would see a 1.3% reduction to $44.96 million, which Batista said was due to a reduction in the recruit class. The Police Department would see a .1% increase to $55.23 million, which McGourthy largely attributed to officers receiving step raises and increases in subscription costs.
While the city is still finalizing the net number of new positions and regraded positions it is proposing, McGourthy said the city generally plans to be lean on how many new positions it will budget for.
Batista said the city has found savings through departments finding positions that could be eliminated or unfunded.
"That's usually what you want to do within the budget - you want to be efficient, you want to be effective in the way you restructure your work," Batista said.
Cost of living adjustment
The city is proposing a cost of living adjustment, or COLA, of 3%. A cost of living adjustment is an increase in pay and benefits to keep up with rising costs due to inflation.
Batista said he believes the 3% COLA is probably the biggest decision in the budget, adding that the city's deficit increased from $6 million to between $10 million and $11 million and he charged his team to find ways to crawl back from the high deficit in order to fund the COLA.
For several departments, including police and fire, the 3% COLA is not reflected in the department budgets as they are in union negotiations. McGourthy said. The funding is in contingency, which is largely made up of money set aside for COLA in the preliminary budget.
Borrowing
The capital budget numbers and fiscal year borrowing have also not been finalized.
The city lists several key projects that are being funded through borrowing, such as the Doherty Memorial High School project, Worcester Arts Magnet School renovations, Fire Department engines and ladders, public safety rehabilitation projects and complete street designs and improvements.
Batista expects the debt service to slightly increase next year.
"That's where we need to pay significant attention, that borrowing authorization year over year," Batista said.
Higher interest rates have added additional challenges to borrowing, Batista said.
While this year's budget required tough decisions, Batista said he is optimistic about the city's financial situation. The decisions the administration made will not compromise operations, he said.
As the city's population has grown over the past several years, Batista said the administration has to make sure it is responding to increasing demand for services such as public safety. He also pointed to the growth of the Executive Office of Economic Development over the years.
"It creates a pressure on our end that we need to do better and we need to be more nimble on those operational needs," Batista said. "We need to be able to adjust a little bit better as operations to be able to fulfill the needs of the community."
This article originally appeared on Telegram & Gazette: Worcester City Manager Eric Batista submits lean 2024 city budget
