Mayor Michelle Wu presents $3.99 billion budget, pledging ‘transformative’ change

New programs and priorities will be funded by federal COVID relief money, Wu said

Boston Mayor Michelle Wu stood outside City HallCraig F. Walker/Globe Staff

Sketching out her vision for a reshaped Boston, Mayor Michelle Wu on Wednesday presented the most detailed look yet at her plans for city spending, proposing to marry hundreds of millions of dollars in federal COVID-19 relief funds with the city’s $3.99 billion operating budget for a multi-year financial plan that she said “sets the foundation for our future.”

Wednesday’s elaborate rollout of an operating budget that would grow $216 million over last fiscal year’s marked a major milestone for Wu, who launches her first budget season as mayor operating under an entirely new process and enjoying a generous cushion of federal COVID relief funds.

“Transformational” was the word of the hour. As their fellow city officials enjoyed bacon and pastries at the traditional City Hall budget breakfast, Wu and her aides sketched broad plans to address the crisis in the city’s housing market and launch her municipal Green New Deal.

The most notable, and most novel, city spending plans appear not within Wu’s proposal for the operating budget, but atop it, in the various projects on which she proposed to spend the one-time influx of federal dollars the city received through the 2021 American Rescue Plan.

The operating budget itself largely resembles those of years past, with the biggest chunks of money devoted to education, public safety, and fixed costs like pensions. It’s the separate pot of federal dollars that Wu would tap for major and perhaps legacy-building investments — hundreds of millions for affordable housing, $15 million for a new office of early childhood, $31.5 million on efforts to respond to the climate crisis.

When she was sworn in, Wu inherited that federal fiscal sandbox filled to the brim with hundreds of millions of dollars, a rare resource that will make it easier for her to implement the ambitious vision she has for the city. Boston came into a transformative amount of money just months before electing a mayor who’s intent on transforming it.

“This budget is an unprecedented investment because we have an unprecedented moment to connect all the resources together,” Wu said Wednesday morning. “We can do something special and transformative in this moment.”

Wu’s approach sets her apart from other city leaders, many of whom have dedicated most or all of their flexible American Rescue Plan money to plugging budget holes. By contrast, Boston intends to use roughly 20 percent of its pot for that purpose.

City officials and advocates were enthusiastic about the proposed new investments in housing and the environment, even as many of the details remained unspecified. But some fiscal watchdogs warned that the city must be careful with how it spends the federal money; funding new programs with one-time cash could leave them insolvent when the money dries up.

“We want to make sure there’s enough funds coming in to prop up any initiatives” that will be ongoing, said Matthew Cahill, executive director of the Boston Finance Commission, an independent agency. Residents grow accustomed to city programs like fare-free buses, he said, and losing those programs for want of funding could be incredibly disruptive for low-income communities.

“Right now there is a lot of money coming in to both the city and state. But we get nervous,” Cahill added with a laugh.

Some proposed uses of the federal dollars, such as improvements at the Mildred C. Hailey public housing complex, would be one-time expenditures. But others, like workforce development in child care and a pilot program for fare-free buses, would have to prove their worth to budget writers if they are to stay funded into the future.

Wu said demonstrating the value of the new programs now will make the case that they merit ongoing funding.

Wednesday’s budget rollout starts a monthslong process of hearings and debate. And it comes in the first year of a new budget process that gives the City Council far more power than it has had in the past, a major structural shift that will test Wu’s sway over the body where she served until last year. Wu’s initial proposal is all but certain to shift.

This year’s budget was informed by feedback from more than 1,000 participants in city listening sessions and a digital survey, city officials said.

Among the most notable investments Wu proposed is a major increase in funding for affordable housing. Pulling heavily from the federal funds as well as from the city’s capital and operating budgets, Wu proposed spending a total of $380 million over several years for everything from financial assistance for first-generation homebuyers to improvements at public housing complexes to new affordable units. Boston residents consistently name housing one of their top concerns, with rents skyrocketing and homeownership increasingly out of reach for all but the wealthiest residents.

“In my history at the city, and probably in all of City Hall’s history, there has never been this kind of investment in righting our housing issues,” said Sheila Dillon, the city’s veteran housing chief. “I have never been so excited about a budget before.”

Wu’s proposal also includes a roughly 1 percent cut to the Boston Police Department budget, a line item that may prove contentious in this year’s discussions. Debates over police funding have proven deeply divisive in the past two years, drawing dissenting votes on the city budget from councilors including Wu.

The 1 percent decrease is a far smaller trim than many local officials — including Wu herself — have advocated for in the past, notably in the wake of the 2020 murder of George Floyd, when Wu signed on to a letter calling for the police budget to be slashed by 10 percent.

“I’ve always believed that it’s pretty arbitrary to pick a number,” Wu told reporters after Wednesday’s breakfast. “It’s really about what impact we deliver to our residents with that.”

The city will work to diversify the police force, she said, and link public safety and public health efforts.

Justin Sterritt, Boston’s chief financial officer, said the decrease in police funding is in large part the result of a lower payroll burden, as the department saw a number of more highly paid, senior officers retire, while hiring new recruits at lower salaries.

Wu’s first budget proposal as mayor comes in a year when the City Council enjoys new power under a process approved by Boston voters in a 2021 referendum. In previous years, the City Council had been empowered only to approve or reject the mayor’s proposed budget, and could transfer funds only if the mayor requested it. The new process allows the council to amend the budget, so long as it does not exceed the original amount proposed by the mayor.

The council must pass its version of the budget by a two-thirds vote; if it does not, the mayor’s proposal would go into effect July 1.

Supporters argue the new budget process will be more democratic and transparent, since councilors will have greater opportunity to advocate for their constituents’ interests. But critics warn the change will make for a chaotic process that could risk the city’s credit rating.

The mayor emphasized Wednesday that she plans to work collaboratively with the council as it wields its new authority.

Ivy Scott of the Globe staff contributed to this report.