Amid pandemic, Walsh unveils $3.6 billion budget proposal

Mayor Martin J. Walsh.Matthew J. Lee/Globe staff

With the city staring down economic troubles brought on by the coronavirus pandemic, Mayor Martin J. Walsh is proposing a $3.65 billion budget for the next fiscal year, calling for a 4.4 percent budgetary bump that will include increased funding for education, housing, and public health.

But with the city, state, and country in the midst of economic upheaval, some called Walsh’s plan for the fiscal year that begins July 1 optimistic and said it may have to be pared down.

The city, said City Councilor Kenzie Bok, has not started “to scratch the surface of the economic recovery” aspect of the crisis. She thought the revenue projections in the proposed budget “are very optimistic and I think the administration knows and we all know we will have to revisit it.” She said that while the mayor’s proposal increases funding for schools, public health, and housing, other city departments appear to be level-funded.

“I think we all know that this year’s budget is going to be a work in progress,” said Bok on Wednesday.

She added, “None of us quite know what the budget might need to look like in a month."

In a recent interview, Justin Sterritt, the city’s budget chief, said the city did make budgetary adjustments and scale back on its ambition, given the realities of the pandemic.

The budget, according to Sterritt,“ acknowledges the new fiscal landscape the city faces but ensures those important city programs have the resources they need.”

The fact that the city’s annual budget depends on property taxes for more than 70 percent of its revenue will give Boston some insulation from the economic downturn, said Sterritt.

Given the pandemic, the city has pushed back the property tax bill deadline a month, and authorities will continue to monitor taxpayers’ ability to foot such bills during the public health crisis, Sterritt said. The city’s property tax base typically grows in a consistent and stable way each year, he said. Still, with the pandemic, there are questions about state aid, and there are other revenue streams, like taxes for restaurant meals, hotels, even jet fuel, that have plummeted.

Entire industries have ground to a halt because of the public health emergency. Last month, Governor Charlie Baker ordered all nonessential businesses in the state to close and issued a stay-at-home advisory. In late March, a record number of Americans filed first-time unemployment claims.

The pandemic has caused the city to careen from an unprecedented economic boom to unprecedented challenges, said Pam Kocher, the president of the Boston Municipal Research Bureau, an independent watchdog.

Kocher said one of the unanswered questions posed by the crisis is what will happen to commercial real estate in the city. Will companies further reduce their footprint in Boston as the pandemic rages on?

“This budget that the city put out, if things go well, this budget could very well be a good fit for a time, but we are in such a time of uncertainty about how long this pandemic will last and how bad it will get,” she said.

In a letter to councilors this week, Walsh said the budget “begins to account for the economic fallout from this pandemic and we will continue to monitor the impacts as they unfold over the coming months.” It proposes “a modest year-over-year increase of $154 million.” The mayor also submitted a $3 billion capital plan for fiscal years 2021 through 2025.

Under his operating budget proposal, the mayor is calling for an $80 million increase for Boston Public Schools, at least $7.5 million in new investment for housing initiatives, and a $9 million increase for the Boston Public Health Commission.

Councilor Andrea Campbell said that because of systemic health disparities, city residents of color are more likely to get sick and die from the coronavirus. Addressing that reality should be a budgetary priority, she said. Depending on how the pandemic plays out, authorities may have to come back in the autumn to reassess the city’s fiscal situation, she said.

“Everyone recognizes we’re clearly in a different world now,” she said.

Councilor Frank Baker was among those to highlight the unknowns. Chief among them: When will the economy bounce back? Baker thought the economic problems brought on by COVID-19 will be worse than the recession in 2008.

For the upcoming budgetary year, the city “might be OK,” said Baker, but future years could bring more severe belt-tightening and hardships.

"We’re going to go through a hard time, collectively,” said Baker.

Councilor Lydia Edwards also thought the brunt of the budgetary impact of the pandemic would be felt in the future, specifically in the city’s budget in two years’ time. She said city councilors will be analyzing what is fiscally realistic in coming weeks, calling the Walsh administration’s projections “fair” and “cautiously optimistic.”

Last year, Moody’s found that Boston was among the American cities that were better prepared for a recession. The credit rating agency looked at four factors to determine a city’s preparedness for recession: fiscal volatility, reserve coverage, financial flexibility, and pension risk. Boston, and five other cities, scored “stronger” in the agency’s analysis.