Boston — City finance officials told the Boston City Council’s Committee on Post Audit, Government Accountability, Transparency, and Accessibility on March 20 that the city closed fiscal 2024 with an $88 million budgetary surplus but faces growing long-term liabilities and some recurring spending pressures.

Councilor Julia Mejia, chair of the committee, opened the hearing on the city’s 2024 Annual Comprehensive Financial Report (ACFR), saying the session was intended to “give the administration an opportunity to go a little bit further, in helping us understand the financial health of this city.” The administration presented top-line ACFR figures and answered councilors’ questions for roughly an hour.

The nut graf: The ACFR shows strong near-term results driven largely by unexpectedly large investment income, but accrual-based financial measures record an unrestricted deficit and rising long-term liabilities. Officials told the committee that legal liability estimates have increased because of probable outcomes in pending cases and that personnel costs — especially public-safety overtime — drove most of the year’s operating overrun.

Chief Financial Officer Ashley Grafenberger, City Auditor Scott Finn and Budget Director James (Jim) Williamson led the presentation. Grafenberger described the ACFR as a GASB-compliant accounting presentation audited by KPMG and said the city’s cash and investment balance was “just over $3,100,000,000.” She also said the general fund held a cash and investment balance of just over $2,000,000,000 and an unassigned fund balance of $1,400,000,000, equal to 30.5% of general fund expenditures.

Officials said much of the fiscal 2024 surplus came from investment income. Grafenberger noted that the city budgeted $29 million for interest on investments but actually collected about $163 million, a function of the high interest rate environment. That revenue, plus stronger excise and departmental receipts, produced a $177 million revenue surplus that offset higher-than-budgeted spending.

On the expenditure side, the city spent roughly $4.381 billion against an adopted budget of $4.292 billion. Williamson and other officials said two categories drove most of the $89 million variance: public-safety overtime and “execution of courts” (judgments and settlements). Williamson explained that public-safety overtime remains elevated because of replacement needs and operational realities in police and fire staffing.

City Auditor Scott Finn explained the city’s accrual accounting position and the difference between fund-basis results and full-accrual statements. Finn said the ACFR shows an “unrestricted deficit of $2,000,000,000 driven by liabilities exceeding assets on an accrual basis.” He added, “if on June 30, we had to pay out every single liability that we owed, whether it's long term or short term, we would be in a deficit of $2,000,000,000.”

Officials gave specific liability figures included in the ACFR: bonds payable of about $2,000,000,000, newly issued debt of $250,000,000 in fiscal 2024, a net pension liability of about $1,500,000,000 (down from the prior year), and an other-postemployment-benefits (OPEB) liability of about $2,600,000,000 (an increase of $250,000,000 from the prior year). Grafenberger said strong retirement-system investment performance contributed to the pension improvement and that actuarial assumptions drove the OPEB increase.

Councilors pressed officials on legal liabilities. Grafenberger and Williamson told the committee that the city had increased reserves for probable legal outcomes, driven in part by a series of wrongful-conviction and related civil claims. Grafenberger said the law department and auditor estimate probable outcomes and reserve accordingly; she confirmed that settled judgments and settlements are public records when resolved in court.

On pensions, Grafenberger said the retirement system’s actuarial valuation shows the pension plan is more than 80% funded and that the city’s schedule targets full funding by 2028, after which normal cost funding would apply. She cautioned, however, that funding status depends on investment returns and other factors and could change over time.

The committee also sought clarity about “free cash.” Budget Director Williamson offered a plain-language explanation: free cash is the portion of the year-end fund balance certified as available after accounting for restrictions such as intergovernmental receivables and reimbursable grants. Grafenberger said the city’s most recent DLS (Division of Local Services) certification put free cash at just over $500,000,000 while noting that not all fund-balance components are immediately expendable.

On capital spending, officials reported approximately $575,000,000 in 2024 capital expenditures, a roughly $186,000,000 increase over the prior year. Grafenberger and Jim Williamson said year-to-year capital spending varies with project timing and cash flow and declined to give a firm single-year forecast for 2025 at the hearing.

Councilors asked how the council can better track adopted-budget changes during the fiscal year. Grafenberger and Williamson described existing practices — periodic reporting to Ways & Means and year-end transfers handled by the auditor — and agreed to provide the year-end transfers and other supporting documents to the committee. The administration said it typically publishes the final adopted-budget document in September after additional formatting and external review (for example, by the Government Finance Officers Association).

What the hearing did not produce: no formal committee actions or votes were taken at this session. The docket remains in committee for follow-up budget and capital hearings, including a deeper dive into the capital plan scheduled for March 27.

The administration and council agreed to follow up with supporting documents requested during the session, including detailed year-end transfers, documentation supporting the legal liability estimates, and clarification on departmental overtime efforts. The committee closed the hearing at about 3:05 p.m.

Ending: Committee members said they will continue the ACFR review during upcoming budget hearings and a March 27 session on capital investments; officials said they will supply the detailed backup the committee requested to inform further budget deliberations.