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Mike Mastrobuoni · Making sense of local budgets

Things cost more.
Our services
feel the squeeze.

Proposition 2½ limits the growth of our property-tax levy. It does not limit the growth of salaries, health insurance, utilities, or other municipal costs. When recurring revenue falls behind the cost of maintaining services, the City faces a structural deficit. Closing it requires additional revenue, expenditure reductions, or both.

Let’s look at the numbers ↓
The levy limit compounds.
So do our costs.

The annual levy limit generally equals the prior-year levy limit, plus a 2.5% increase, plus certified new growth. An operating override permanently increases the levy-limit base. The levy ceiling is 2.5% of the full and fair cash value of taxable property; debt and capital exclusions can authorize additional taxes under separate rules. See the Massachusetts DLS explanation ↗

01 / The pressure

Here’s what
the numbers show.

Compare the cumulative 2.5% levy-limit increase with Boston-area inflation and selected cost indicators. Each series starts at 100. The recent view includes a GIC health-insurance premium; the longer view uses Boston medical-care CPI. When costs rise faster than the levy-limit base, maintaining services requires revenue beyond the statutory 2.5% increase.

Total growth, 2020–2025

2.5% levy-limit growthBoston: all pricesBoston: service pricesGIC: PLUS family planBoston: energy

Index: starting year = 100. Boston-Cambridge-Newton, MA-NH CPI-U annual averages, 2006–2025. All four price lines cover the same metro region. Service prices exclude shelter rent; they are a broad household-service benchmark, not municipal contract prices. These measure household prices, not a city budget. Medical care is not the city’s insurance premium; energy is not its utility contract. Automatic growth excludes new growth and overrides.

Show the historical data
YearBoston all-items CPI-UBoston services excluding shelter rent CPIGIC PLUS family monthly premium ($)Boston energy CPI2.5% levy-limit index

02 / The other revenue

Taxes aren’t
the whole budget.

The General Fund rests on three main recurring revenue sources: the property-tax levy, state aid, and local receipts such as motor vehicle excise and fees. They are not equal shares. When state aid loses purchasing power, the City must rely more heavily on the levy and local receipts, reduce expenditures, or both.

Medford state aid, FY2006–FY2025

Published state aidIf FY2006 aid kept up with Boston inflation

The longer view includes the financial-crisis period. *FY2009 is the original budget allocation, before midyear cuts; it is not the final amount received. Combined aid means Chapter 70 school aid plus unrestricted aid, before state assessments. Before FY2010, unrestricted aid combines lottery aid and additional assistance; after that, it is UGGA. It excludes other aid and grants. The benchmark increases FY2006 aid by Boston CPI-U annual-average growth, using the calendar year with the same number as each fiscal year. Fiscal and calendar years differ; this is an illustrative purchasing-power comparison, not a fiscal-year cost index or a city deficit. Chapter 70 follows school-funding rules; it isn’t interchangeable with unrestricted aid.

Show annual aid and year-over-year changes
Fiscal yearAid ($)Aid changeBoston CPI changeInflation benchmark ($)Benchmark less aid ($)

Negative differences mean aid is above the benchmark. The first year is the baseline. FY2006–FY2009 are DLS archived estimates (FY2009 before midyear cuts). FY2010–FY2025 were transcribed from the Medford report supplied October 14, 2026; these are published aid allocations, not audited cash receipts. FY2026 and FY2027 are excluded to match the complete CPI period.

03 / Levy-limit growth

New growth determines
how far beyond 2.5% we go.

The statutory 2.5% increase is only one component of annual levy-limit growth. Certified new growth adds recurring revenue capacity beyond that increase. The bars separate those two components; the line shows new growth as a percentage of the prior-year levy limit.

Medford annual levy-limit additions, FY2006–FY2025

2.5% levy-limit increase · left axisCertified new growth · left axisNew growth ÷ prior-year levy limit · right axis

Bars show annual additions to levy capacity, not the full levy or total property-tax collections. The statutory component is 2.5% of the prior-year levy limit. The line uses that same prior-year limit as its denominator, consistent with DLS. Overrides, exclusions, and other adjustments are not included in the bars, so their combined height is not necessarily the total annual change in the levy limit. The dollar and percentage axes use separate scales.

Show annual levy-limit additions
Fiscal yearPrior-year levy limit ($)2.5% increase ($)Certified new growth ($)Combined additions ($)New growth share of additionsNew growth / prior-year limit

DLS New Growth Analysis, Medford. Values transcribed from the supplied report, October 14, 2026. The 2.5% component is calculated from the reported prior-year levy limit; displayed dollars are rounded. FY2026 and FY2027 are excluded to keep the historical charts on the same end year.

04 / The choices

A structural deficit
requires recurring solutions.

01 / Grow the base

Expand the tax base
through new growth.

Certified new growth adds recurring levy capacity beyond the annual 2.5% increase. It reflects qualifying additions to the tax base, including new construction, improvements, and newly taxable property. It becomes part of the levy-limit base and compounds in subsequent years.

Development is therefore a fiscal policy decision as well as a land-use decision. Its net benefit depends on the recurring revenue it generates and the municipal services it requires. Appreciation and revaluation of existing property do not create new growth.

02 / Choose more capacity

Use operating overrides
to fund recurring needs.

An operating override allows voters to authorize a permanent increase in the levy limit to support recurring expenditures. It is an available financing tool when the existing revenue base cannot sustain the services the community chooses to provide.

The override amount becomes part of the levy-limit base, subject to the levy ceiling. The annual 2.5% limitation then applies to that larger base. An override can close a current structural deficit; continued expenditure growth above revenue growth can create another. A debt exclusion temporarily authorizes taxes for qualifying debt service.

03 / Live within less

Reduce the
service baseline.

Without sufficient recurring revenue, the City must reduce recurring expenditures. Efficiencies can offset part of the gap. A persistent structural deficit can also require staffing reductions, reduced service levels, and deferred maintenance.

Those reductions have operating consequences: fewer staffed positions, shorter library hours, fewer programs, and a growing backlog of asset maintenance. Deferring an expenditure does not necessarily eliminate the obligation or its eventual cost.

State aid, local receipts, excess levy capacity, and operating efficiencies also affect the forecast. Reserves can bridge a temporary imbalance. Using one-time funds to support recurring expenditures does not resolve a structural deficit.

05 / Try the math

Try the choices
for yourself.

Start with $100 million for services and the same amount in property-tax capacity. The cost slider starts at 4.1%—Boston’s average annual consumer price growth from 2020 to 2025, rounded. That’s a starting point to explore, not a forecast of city costs. Move the sliders and see what changes.

What it takes to keep the same services

Scenario · not a forecast
Cost of the same services2.5% increase onlyWith new growthNew growth + override

Amounts in millions. Every slider is an assumption, not an observed Medford cost series. The initial 4.1% cost rate comes from (346.889 ÷ 284.266)^(1/5) − 1, rounded to one decimal percent. New growth is a fixed annual dollar addition, not a percent growth assumption. The year-3 override is added once and grows with the base thereafter. This illustration excludes the levy ceiling, other revenues, excess capacity, exclusions, and development-related service costs. It is not a whole-budget model or a household tax estimate.

Show scenario values
YearCost ($M)2.5% increase only ($M)New growth ($M)New growth + override ($M)

06 / The point

Nominal budget growth can still mean a reduction in service capacity.

Proposition 2½ imposes a revenue constraint without a corresponding limit on municipal cost escalation. When the two diverge, the result is pressure on staffing, programs, and capital maintenance. Sustaining services requires a recurring revenue plan that matches the expenditure forecast.

Let’s get to work.

The evidence

Don’t take my word for it.
Here are the sources.

The first chart uses published Boston-area price data, a Massachusetts GIC insurance premium, and the math behind the 2.5% rule. The state-aid chart uses Medford’s published aid and an inflation benchmark. The slider chart is an example, not a prediction for Medford. Here’s where the numbers come from.

SourceArea and coverageHow it is used
DLS: New Growth Analysis ↗Medford, FY2006–FY2025. Total new growth applied to the levy limit and prior-year levy limit; supplied report screenshot, October 14, 2026.Annual stacked statutory increase and certified new growth. The percentage line is new growth divided by the prior-year levy limit; it is not new growth as a share of the current tax levy.
DLS: Medford Cherry Sheet receipts ↗FY2006–FY2025 Chapter 70 and UGGA. FY2006–FY2009: 2006, 2007, 2008, 2009 DLS archived spreadsheets. FY2010–FY2025: supplied Medford report, current October 14, 2026.Before FY2010, the unrestricted category combines lottery aid (including the FY2009 lottery supplement) and additional assistance. FY2009 is the original, pre-cut budget. Published aid before assessments, compared with FY2006 aid increased by Boston CPI. Categories remain separate; other aid, grants, and state charges are excluded.
Massachusetts DLS ↗Massachusetts property-tax law.The 2.5% framework. It applies to the community’s levy limit; individual bills can change differently.
Boston CPI-U: all items ↗Boston-Cambridge-Newton, MA-NH. BLS series CUUSA103SA0; annual averages, not seasonally adjusted.The overall household-price line. Values run through 2025, the latest complete calendar year.
Boston CPI-U: services excluding shelter rent ↗Boston-Cambridge-Newton, MA-NH. BLS series CUUSA103SASL2RS; complete annual averages, 2006–2025, not seasonally adjusted.A broad service-price comparison with shelter rent removed. Useful context for service-cost pressure; it is not a price index for municipal contracts or government employee pay.
GIC: PLUS family-plan premiumFull municipal monthly family premium, including the applicable administrative fee, effective July 1, 2020–2025. 2020 · 2021 · 2022 · 2023 · 2024 · 2025.A statewide municipal insurance benchmark using one plan, not an enrollment-weighted GIC average or citywide expense. UniCare PLUS was renamed Wellpoint PLUS in 2024. Benefit changes are included in the premium path.
Boston CPI-U: medical care ↗The same metro region. BLS series CUUSA103SAM; annual averages, not seasonally adjusted.Used in the 2006 view only. A household medical-price comparison. It does not measure municipal health-insurance premiums.
Boston CPI-U: energy ↗The same metro region. BLS series CUUSA103SA0E; annual averages, not seasonally adjusted.A household energy-price comparison. It does not measure the rates in a city’s utility or fuel contracts.
How local is “Boston metro”?

The current Boston-Cambridge-Newton CPI area includes Essex, Middlesex, Norfolk, Plymouth, and Suffolk counties in Massachusetts, plus Rockingham and Strafford counties in New Hampshire. Medford and Somerville are in Middlesex County. This is regional data, not a separate index for either city.

BLS does not publish a Medford, Somerville, or Middlesex County CPI. Its geographic definitions changed in 2018; earlier values belong to the predecessor Boston area within this continuous published series.

For actual local service costs, we would need local pay schedules, insurance rates, utility contracts, pension assessments, and other city obligations. Total spending increases alone don’t tell us how much was inflation and how much was a change in services.

BLS Boston CPI area definition ↗ · 2018 geographic revision ↗

Why isn’t there a Boston public-employee cost line?

The national public-employee series has been removed. BLS publishes a Boston compensation series, but it covers private employers—not city or school employees—and the larger Boston–Worcester–Providence region. Using it as a Boston municipal cost index would be misleading.

The service, medical-care, and energy lines above are local price comparisons, not replacements for a municipal compensation index. There is no measured citywide cost-of-services line on this page.

Read the BLS Boston compensation coverage ↗

How the charts work—and what they don’t tell us
  • All CPI data comes from BLS Boston-area CPI-U, accessed through FRED. The recent view replaces medical-care CPI with the published GIC PLUS family full municipal premium for 2020–2025. Coverage: 2006–2025. Checked October 14, 2026. No national price or compensation series is plotted.
  • Each CPI line is 100 × that year’s annual index ÷ the starting year’s annual index. The GIC line is 100 × that year’s July premium ÷ the July 2020 premium. The automatic line is 100 × 1.025 raised to the number of elapsed years.
  • CPI uses calendar-year averages. GIC uses rates effective July 1 of the labeled year; for example, 2025 is the FY2026 rate. These are different time conventions and are not matched to a city’s fiscal-year levy. The partial 2026 year is excluded.
  • A difference between lines is a difference in cumulative growth, not an actual city deficit or measured service cut.
  • CPI measures household purchases. It does not measure city staffing, employer insurance costs, pension funding, mandated services, debt, or construction costs. The service, medical-care, and energy lines overlap and are already included in all-items CPI. Compare their paths; don’t add their growth rates together.
  • Boston-area data can show different results from national data. Both the chosen period and the type of cost matter. The explanation changes with the numbers.
  • The slider chart is a hypothetical ten-year example. Its cost rate starts at the rounded compound annual growth rate of Boston all-items CPI from 2020 to 2025. It is not a municipal cost forecast.
  • New growth and overrides add to the levy-limit base. General operating overrides are subject to the levy ceiling. Debt exclusions are temporary and follow different rules.
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