Somerville’s Finance Director presented the FY25 midyear financial report to the Finance Committee on March 11, telling the committee the city was on track for a modest surplus in FY25 but that next year’s budget faces multiple pressures.

Key points from the report
- Revenue: Through January the city had collected roughly 68.1% of its annual revenue budget; collections were slightly stronger than the same point last year but slower in major growth categories such as building permits and meals tax. Building‑permit receipts have declined from prior years as development activity slows in a higher‑interest environment.
- Health insurance: The Group Insurance Commission (GIC) had just announced a substantial proposed increase in medical premiums. The administration said GIC proposed average increases on some plans in the double digits (the presentation referenced an illustrative 12.7% increase for some Medicare‑related plans), which would add several million dollars to next year’s employer health‑insurance budget.
- Pensions: An updated actuarial valuation will raise the city’s pension appropriation and contribute an estimated increase in FY26 pension costs; the city’s current amortization schedule is to pay down liability through 2033.
- Debt and capital: Rising interest rates affect debt service estimates for the FY26 capital financing plan; the director provided an estimate of modest debt‑service growth tied to planned capital borrowing and to short‑term notes issued for an ongoing property matter.

Asked about federal grants, the finance director warned that possible federal funding reductions for education and other programs would create additional budget uncertainty and asked the committee to consider multiple scenarios.

The committee requested a full breakdown of federal grant receipts and school grant items that could be affected by budget action and the administration agreed to supply a department‑level grant list and to present updated revenue projections after the third quarter.

Why it matters
The midyear report frames the administration’s preliminary planning for FY26. Health‑insurance premiums and pension requirements are fixed‑cost pressures that reduce available capacity for new initiatives; lower development permit revenue and possible federal grant reductions would further constrain next year’s options.

What the committee asked for next
- A department‑level list of FY24 and FY25 federal grants and a school‑department breakdown of federal funding at risk.
- Updated revenue projections with third‑quarter data for use in FY26 budget development.

Provenance: Formal midyear presentation and committee Q&A, March 11 meeting transcript.