NORTHAMPTON — The outlook for the city’s budget next fiscal year hinges on several key factors to be ironed out this spring, including new labor contracts, health care costs and revenue from retail marijuana sales.
At a budget forecast presentation before a joint meeting of the City Council and School Committee last week, Mayor David Narkewicz also cautioned that a special fund created in the wake of a 2013 override will eventually run out.
The city dipped into the fund for the first time in the current fiscal year to maintain services in its nearly $112 million budget. When this fiscal year ends June 30, the fund is expected to contain $2.67 million. Next year’s fiscal 2020 budget, which begins July 1, must be approved by the end of June.
The $2.5 million 2013 override was designed to fund schools and city services while setting the remainder aside into a fund for stabilizing the city’s budget. Although the money was initially expected to last four years — through fiscal 2017 — modest gains in some state aid and an uptick in development in the city are a few reasons why the fund has lasted, Narkewicz said.
Although the mayor has yet to determine if the city will need to dip into the fund next fiscal year, the current budget approved by the council last spring shows that the city will use $909,000 for fiscal 2020 and another $1.7 million in fiscal 2021, when funds are projected to run out. Those figures will be updated through the upcoming budget process, Narkewicz said.
“Can we stave it off beyond 2021 or is 2021 when we reach the point when that fund will no longer allow us to balance our budget?” Narkewicz told the Gazette. The answer to that question partially depends on how the 2020 budget plays out, he said.
Before the council and School Committee last week, Narkewicz cautioned that once the fund is drained, the city could face a decision between another override or making cuts.
“This was always intended to be a bridge in buying us stability over several years,” the mayor said.
Looking to fiscal 2020 budget, Narkewicz noted that two new local taxes will bring in extra money, but it is not yet clear exactly how much.
Starting July 1, a new law will force short-term renters, such as those who use Airbnb, to pay state lodging taxes and some money will flow to the city.
Additionally, Northampton adopted a 3 percent local tax on marijuana sales, and the city should know this spring how much it will gain from early sales. In just the first three weeks, the state saw more than $7 million in recreational marijuana sales between New England Treatment Access in Northampton and Cultivate in Leicester.
The initial taxes the city gains may be high, but Narkewicz cautioned that they could later drop as more shops open across the state.
“I think those numbers will be a little bit outsized,” he predicted.
Marijuana taxes are not a fix to the budget like reforming how the state funds schools, Narkewicz said.
“We’re not smoking our way out of this problem,” he said.
Two PILOT (payment in lieu of taxes) solar projects would bring in money, but are still in development.
“Whether they happen in 2020 remains to be seen,” Narkewicz said.
There are other varying factors, such as upcoming collective bargaining with city and school employees and increases to the city’s retirement payments.
Health care costs are “another big wild card,” Narkewicz said.
Gov. Charlie Baker’s proposed budget next fiscal year would give Northampton an estimated $160,000 less than last fiscal year, according to the mayor.
Several people, including Narkewicz, expressed a strong desire to change the “foundation budget,” a formula that decides how much money the state gives schools. The formula underestimates costs and short-changes schools, the bipartisan Foundation Budget Review Commission concluded in 2015.
Baker recently proposed budget changes that would address the formula, and the money would be phased in over a seven-year period.
“That will not work … He’s kicking the can down the road in my opinion,” Narkewicz said.
School Committee member Susan Voss said the district should pay its teachers more.
“We’re not paying our teachers well — they’re getting paid at the very bottom of the state.”
Northampton public school teachers were paid on average $61,711 in the 2016-2017 academic year, nearly $17,000 less than the year’s state average, according to the most recent data available from to the state Department of Elementary and Secondary Education.
In May, the mayor will submit a budget to the City Council which must vote on the budget by June 30, 2019.
Greta Jochem can be reached at gjochem@gazettenet.com