Coronavirus Hits Worcester Budget: Hiring Freeze, No New Programs

WORCESTER, MA — City Manager Edward Augustus is preparing to send his fiscal year 2021 budget to City Council, and he's building it knowing that coronavirus may cut into revenue.

Augustus froze hiring on April 6, and his upcoming budget will carry that forward into the new fiscal year that starts July 1. He's also not proposing any new city programs or initiatives for the upcoming year.

"At the start of the budget process in January our financial picture was strong," Augustus wrote in a letter to City Council last week. "We anticipated tax growth, growth in local receipts, and an increase in state aid. However, as the COVID-19 pandemic unfolded, we quickly realized the budget preparation was not going to be straightforward and that we would have to make significant assumptions in our revenue projections and to restrict our spending expectations."

One revenue source that's up in the air is state aid. Gov. Charlie Baker released his proposed fiscal 2021 budget in January, with Worcester set to get about $346 million in state aid in the next fiscal year — up from $325 million in fiscal 2020. Most of that increase comes from a rise in funding for Worcester schools.

But, the state Legislature might change state aid calculations after Worcester approves its budget, Augustus told the Council. The state is dealing with a downturn in tax revenue due to job losses — close to 700,000 since March — and closed businesses. State officials are anticipating some kind of federal stimulus, however.

Augustus said he will put a large amount of money in the city's contingency account. If the economy improves, that account could be used to cover new spending. It would also allow Worcester to deal with a big cut in state aid.

Worcester is already dealing with spending issues related to coronavirus. On Tuesday, the City Council will review budget transfers to help several city agencies. The DCU Center needs $390,000 to make it through May due to lost programming, and the use of the arena as a coronavirus field hospital.

Augustus typically submits his budget proposal to City Council in May. The Council then reviews the proposal and makes changes, if necessary. Last year, the Council passed the $685.7 million fiscal 2020 budget in late June without any changes. That budget was about 5 percent bigger than the fiscal 2019 budget.

The fiscal 2021 budget proposal will be in front of City Council at the May 12 meeting.

"As we have throughout the COVID-19 crisis, we will deal with what is in front of us," Augustus' letter to Council said. "The city has managed through serious financial issues in the past, and we are preparing our organization to be able to react decisively to the challenges ahead."